Item 15. Exhibits and Financial Statement Schedules

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Item 15. Exhibits and Financial Statement Schedules

(A) Financial Statements



(1) Consolidated Financial Statements of Essex Property Trust, Inc.	Page

Reports of Independent Registered Public Accounting Firm	F- 1

Consolidated Balance Sheets: As of December 31, 2015 and 2014	F- 4

Consolidated Statements of Income: Years ended December 31, 2015, 2014, and 2013	F- 5

Consolidated Statements of Comprehensive Income: Years ended December 31, 2015, 2014, and 2013	F- 6

Consolidated Statements of Equity: Years ended December 31, 2015, 2014, and 2013	F- 7

Consolidated Statements of Cash Flows: Years ended December 31, 2015, 2014, and 2013	F- 10

Notes to Consolidated Financial Statements	F- 20

(2) Consolidated Financial Statements of Essex Portfolio, L.P.

Report of Independent Registered Public Accounting Firm	F- 3

Consolidated Balance Sheets: As of December 31, 2015 and 2014	F- 12

Consolidated Statements of Income: Years ended December 31, 2015, 2014, and 2013	F- 13

Consolidated Statements of Comprehensive Income: Years ended December 31, 2015, 2014, and 2013	F- 14

Consolidated Statements of Capital: Years ended December 31, 2015, 2014, and 2013	F- 15

Consolidated Statements of Cash Flows: Years ended December 31, 2015, 2014, and 2013	F- 18

Notes to Consolidated Financial Statements	F- 20

(3) Financial Statement Schedule – Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2015	F- 52

(4) See the Exhibit Index immediately following the signature page and certifications for a list of exhibits filed or incorporated by reference as part of this report.

(B) Exhibits

The Company hereby files, as exhibits to this Form 10-K, those exhibits listed on the Exhibit Index referenced in Item 15(A)(4) above.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Essex Property Trust, Inc.:

We have audited the accompanying consolidated balance sheets of Essex Property Trust, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, equity, and cash

flows for each of the years in the three-year period ended December 31, 2015. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule III. These consolidated financial statements and the accompanying financial statement schedule III are the responsibility of Essex Property Trust, Inc.’s management. Our responsibility is to express an opinion on these consolidated financial statements and the accompanying financial statement schedule III based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Essex Property Trust, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Essex Property Trust, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2016 expressed an unqualified opinion on the effectiveness of Essex Property Trust, Inc.’s internal control over financial reporting.



/S/ KPMG LLP
KPMG LLP

San Francisco, California

February 26, 2016

F- 1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Essex Property Trust, Inc.:

We have audited Essex Property Trust, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Essex Property Trust, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting, appearing under Item 9A. Our responsibility is to express an opinion on Essex Property Trust, Inc.'s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Essex Property Trust, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Essex Property Trust, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated February 26, 2016, expressed an unqualified opinion on those consolidated financial statements.



/S/ KPMG LLP
KPMG LLP

San Francisco, California

February 26, 2016

F- 2

Report of Independent Registered Public Accounting Firm

The General Partner

Essex Portfolio, L.P.:

We have audited the accompanying consolidated balance sheets of Essex Portfolio, L.P. (the Operating Partnership) and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, capital, and cash flows for each of the years in the three-year period ended December 31, 2015. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule III. These consolidated financial statements and the accompanying financial statement schedule III are the responsibility of Operating Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements and the accompanying financial statement schedule III based on our audits.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Essex Portfolio, L.P. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.



/S/ KPMG LLP
KPMG LLP

San Francisco, California

February 26, 2016

F- 3

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2015 and 2014

(Dollars in thousands, except share amounts)



	2015			2014
ASSETS
Real estate:
Rental properties:
Land and land improvements	$	2,522,842		$	2,424,930
Buildings and improvements	9,808,627			8,819,751
	12,331,469			11,244,681
Less accumulated depreciation	(1,949,892		)	(1,564,806		)
	10,381,577			9,679,875
Real estate under development	242,326			429,096
Co-investments	1,036,047			1,042,423
Real estate held for sale, net	26,879			56,300
	11,686,829			11,207,694
Cash and cash equivalents-unrestricted	29,683			25,610
Cash and cash equivalents-restricted	93,372			70,139
Marketable securities and other investments	137,485			117,240
Notes and other receivables	19,285			24,923
Acquired in-place lease value, net	2,857			47,748
Prepaid expenses and other assets	35,580			33,378
Total assets	$	12,005,091		$	11,526,732
LIABILITIES AND EQUITY
Unsecured debt, net	$	3,088,680		$	2,603,548
Mortgage notes payable, net	2,215,077			2,234,317
Lines of credit, net	11,707			242,824
Accounts payable and accrued liabilities	131,415			135,162
Construction payable	40,953			30,892
Dividends payable	100,266			88,221
Other liabilities	34,518			32,444
Total liabilities	5,622,616			5,367,408
Commitments and contingencies
Redeemable noncontrolling interest	45,452			23,256
Equity:
Common stock; $.0001 par value, 656,020,000 shares authorized; 65,379,359 and 63,682,646 shares issued and outstanding, respectively	6			6
Cumulative redeemable 7.125% Series H preferred stock at liquidation value	73,750			73,750
Additional paid-in capital	7,003,317			6,651,165
Distributions in excess of accumulated earnings	(797,329		)	(650,797		)
Accumulated other comprehensive loss, net	(42,011		)	(51,452		)
Total stockholders' equity	6,237,733			6,022,672
Noncontrolling interest	99,290			113,396
Total equity	6,337,023			6,136,068
Total liabilities and equity	$	12,005,091		$	11,526,732

See accompanying notes to consolidated financial statements.

F- 4

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Income

Years ended December 31, 2015, 2014 and 2013

(Dollars in thousands, except per share and share amounts)



	2015			2014			2013
Revenues:
Rental and other property	$	1,185,498		$	961,591		$	603,327
Management and other fees from affiliates	8,909			9,347			7,263
	1,194,407			970,938			610,590
Expenses:
Property operating, excluding real estate taxes	234,953			204,673			140,060
Real estate taxes	128,555			107,873			57,276
Depreciation and amortization	453,423			360,592			192,420
General and administrative	40,090			40,878			26,684
Merger and integration expenses	3,798			53,530			4,284
Acquisition and investment related costs	2,414			1,878			1,161
	863,233			769,424			421,885
Earnings from operations	331,174			201,514			188,705
Interest expense	(204,827		)	(164,551		)	(116,524		)
Total return swap income	5,655			—			—
Interest and other income	19,143			11,811			11,633
Equity income from co-investments	21,861			39,893			55,865
Loss on early retirement of debt, net	(6,114		)	(268		)	(300		)
Gains on sale of real estate and land	47,333			46,039			1,503
Gains on remeasurement of co-investment	34,014			—			—
Income before discontinued operations	248,239			134,438			140,882
Income from discontinued operations	—			—			31,173
Net income	248,239			134,438			172,055
Net income attributable to noncontrolling interest	(16,119		)	(12,288		)	(15,772		)
Net income attributable to controlling interest	232,120			122,150			156,283
Dividends to preferred stockholders	(5,255		)	(5,291		)	(5,472		)
Net income available to common stockholders	$	226,865		$	116,859		$	150,811
Per share data:
Basic:
Income before discontinued operations available to common stockholders	$	3.50		$	2.07		$	3.26
Income from discontinued operations available to common stockholders	—			—			0.79
Net income available to common stockholders	$	3.50		$	2.07		$	4.05
Weighted average number of shares outstanding during the year	64,871,717			56,546,959			37,248,960
Diluted:
Income before discontinued operations available to common stockholders	$	3.49		$	2.06		$	3.25
Income from discontinued operations available to common stockholders	—			—			0.79
Net income available to common stockholders	$	3.49		$	2.06		$	4.04
Weighted average number of shares outstanding during the year	65,061,685			56,696,525			37,335,295

See accompanying notes to consolidated financial statements.

F- 5

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Years ended December 31, 2015, 2014 and 2013

(Dollars in thousands)



	2015			2014			2013
Net income	$	248,239		$	134,438		$	172,055
Other comprehensive income (loss):
Changes in fair value of cash flow hedges and reclassification to interest expense	7,893			4,168			12,614
Changes in fair value of marketable securities	1,865			6,302			(1,556		)
Reversal of unrealized gains upon the sale of marketable securities	—			(886		)	(1,767		)
Total other comprehensive income	9,758			9,584			9,291
Comprehensive income	257,997			144,022			181,346
Comprehensive income attributable to noncontrolling interest	(16,436		)	(12,852		)	(16,274		)
Comprehensive income attributable to controlling interest	$	241,561		$	131,170		$	165,072

See accompanying notes to consolidated financial statements.

F- 6

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Equity

Years ended December 31, 2015, 2014 and 2013

(Dollars and shares in thousands)



	Series H Preferred stock			Common stock			Additional paid-in			Distributions in excess of accumulated			Accumulated other comprehensive			Noncontrolling
	Shares	Amount		Shares	Amount		capital			earnings			loss, net			Interest			Total
Balances at December 31, 2012	2,950	$	73,750	36,443	$	3	$	2,204,778		$	(444,466	)	$	(69,261	)	$	115,312		$	1,880,116
Net income	—	—		—	—		—			156,283			—			15,772			172,055
Reversal of unrealized gains upon the sale of marketable securities	—	—		—	—		—			—			(1,673		)	(94		)	(1,767		)
Change in fair value of cash flow hedges and amortization of swap settlements	—	—		—	—		—			—			11,934			680			12,614
Change in fair value of marketable securities	—	—		—	—		—			—			(1,472		)	(84		)	(1,556		)
Issuance of common stock under:
Stock option plans	—	—		65	—		7,244			—			—			—			7,244
Sale of common stock	—	—		913	1		138,365			—			—			—			138,366
Equity-based compensation costs	—	—		—	—		(907		)	—			—			2,515			1,608
Redemptions of noncontrolling interest	—	—		—	—		(3,717		)	—			—			(1,994		)	(5,711		)
Distributions to noncontrolling interest	—	—		—	—		—			—			—			(18,488		)	(18,488		)
Common and preferred stock dividends	—	—		—	—		—			(186,243		)	—			—			(186,243		)
Balances at December 31, 2013	2,950	73,750		37,421	4		2,345,763			(474,426		)	(60,472		)	113,619			1,998,238
Net income	—	—		—	—		—			122,150			—			12,288			134,438
Reversal of unrealized gains upon the sale of marketable securities	—	—		—	—		—			—			(841		)	(45		)	(886		)
Changes in fair value derivatives and amortization of swap settlements	—	—		—	—		—			—			3,721			447			4,168
Changes in fair value of marketable securities	—	—		—	—		—			—			6,140			162			6,302
Issuance of common stock under:
Stock consideration in the Merger, net	—	—		23,067	2		3,774,085			—			—			—			3,774,087

F- 7



Stock option and restricted stock plans	—	—	218	—	11,024		—		—		—		11,024
Equity distribution agreements, net	—	—	2,943	—	532,670		—		—		—		532,670
Equity-based compensation costs	—	—	—	—	5,719		—		—		6,153		11,872
Reclassification of noncontrolling interest to redeemable noncontrolling interest	—	—	—	—	(19,823	)	—		—		(1,067	)	(20,890	)
Changes in the redemption value of redeemable noncontrolling interest	—	—	—	—	312		—		—		—		312
Conversion of Series G preferred stock	—	—	34	—	4,349		—		—		—		4,349
Contributions from noncontrolling interest	—	—	—	—	—		—		—		1,419,816		1,419,816
Retirement of noncontrolling interest	—	—	—	—	—		—		—		(1,419,816	)	(1,419,816	)
Distributions to noncontrolling interest	—	—	—	—	—		—		—		(17,069	)	(17,069	)
Redemptions of noncontrolling interest	—	—	—	—	(2,934	)	—		—		(1,092	)	(4,026	)
Common and preferred stock dividends	—	—	—	—	—		(298,521	)	—		—		(298,521	)
Balances at December 31, 2014	2,950	73,750	63,683	6	6,651,165		(650,797	)	(51,452	)	113,396		6,136,068
Net income	—	—	—	—	—		232,120		—		16,119		248,239
Change in fair value of derivatives and amortization of swap settlements	—	—	—	—	—		—		7,637		256		7,893
Change in fair value of marketable securities	—	—	—	—	—		—		1,804		61		1,865
Issuance of common stock under:
Stock option and restricted stock plans	—	—	207	—	26,540		—		—		—		26,540
Sale of common stock	—	—	1,489	—	332,137		—		—		—		332,137
Equity based compensation costs	—	—	—	—	5,946		—		—		3,700		9,646
Reclassification of noncontrolling interest to redeemable noncontrolling interest	—	—	—	—	(7,657	)	—		—		(12,115	)	(19,772	)
Changes in the redemption value of redeemable noncontrolling interest	—	—	—	—	(2,615	)	—		—		—		(2,615	)
Distributions to noncontrolling interest	—	—	—	—	—		—		—		(21,705	)	(21,705	)

F- 8



Redemptions of noncontrolling interest	—	—		—	—		(2,199		)	—			—			(422		)	(2,621		)
Common and preferred stock dividends	—	—		—	—		—			(378,652		)	—			—			(378,652		)
Balances at December 31, 2015	2,950	$	73,750	65,379	$	6	$	7,003,317		$	(797,329	)	$	(42,011	)	$	99,290		$	6,337,023

See accompanying notes to consolidated financial statements.

F- 9

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2015, 2014 and 2013

(Dollars in thousands)



	2015			2014			2013
Cash flows from operating activities:
Net income	$	248,239		$	134,438		$	172,055
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	453,423			360,592			193,518
Earnings from co-investments	(21,392		)	(33,335		)	(14,613		)
Company's share of gain on the sales of co-investments	(469		)	(6,558		)	(41,252		)
Operating distributions from co-investments	46,608			49,486			19,636
Gain on the sales of real estate and land	(47,333		)	(46,039		)	(30,725		)
Loss on early retirement of debt, net	6,114			268			300
Gains on sale of marketable securities and other investments	(598		)	(886		)	(1,767		)
Amortization of (premium) discount and financing costs, net	(19,361		)	(14,672		)	12,216
Amortization of discount on notes receivables	—			—			(844		)
Amortization of discount on marketable securities and other investments	(12,389		)	(9,325		)	(6,556		)
Non cash merger and integration expenses	—			9,025			—
Equity-based compensation	6,061			8,740			4,508
Gains on remeasurement of co-investment	(34,014		)	—			—
Changes in operating assets and liabilities:
Prepaid expenses, in-place lease value, receivables and other assets	267			15,828			(1,588		)
Accounts payable and accrued liabilities	(9,633		)	24,233			72
Other liabilities	1,887			1,517			22
Net cash provided by operating activities	617,410			493,312			304,982
Cash flows from investing activities:
Additions to real estate:
Acquisitions of real estate and acquisition related capital expenditures	(515,726		)	(387,547		)	(348,774		)
Redevelopment	(99,346		)	(81,429		)	(47,289		)
Development acquisitions of and additions to real estate under development	(157,900		)	(152,766		)	(17,757		)
Capital expenditures on rental properties	(57,277		)	(78,864		)	(56,919		)
Proceeds from insurance for property losses	16,811			35,547			—
BRE merger consideration paid	—			(555,826		)	—
Acquisition of membership interest in co-investment	(115,724		)	—			—
Dispositions of real estate	319,008			141,189			65,496
Dispositions of co-investments	31,556			13,900			—
Changes in restricted cash and refundable deposits	(14,068		)	(36,582		)	(9,149		)
Purchases of marketable securities	(14,300		)	(20,516		)	(16,442		)
Sales and maturities of marketable securities and other investments	8,907			8,753			24,172
Purchases of and advances under notes and other receivables	—			—			(56,750		)
Collections of notes and other receivables	—			76,585			53,438
Contributions to co-investments	(127,879		)	(246,006		)	(162,578		)
Non-operating distributions from co-investments	382			136,406			118,856

F- 10



Net cash used in investing activities	(725,556		)	(1,147,156		)	(453,696		)
Cash flows from financing activities:
Borrowings under debt agreements	1,345,855			2,093,406			969,061
Repayment of debt	(1,197,351		)	(1,814,020		)	(750,900		)
Additions to deferred charges	(8,034		)	(17,402		)	(7,402		)
Net proceeds from stock options exercised	26,540			11,039			4,958
Net proceeds from issuance of common stock	332,137			531,379			137,749
Distributions to noncontrolling interest	(21,055		)	(17,465		)	(18,488		)
Redemption of noncontrolling interest	(2,621		)	(5,753		)	(5,711		)
Common and preferred stock dividends paid	(367,257		)	(260,574		)	(180,668		)
Net cash provided by financing activities	108,214			520,610			148,599
Cash acquired from the BRE merger	—			140,353			—
Cash acquired from consolidation of co-investment	4,005			—			—
Net increase (decrease) in cash and cash equivalents	4,073			7,119			(115		)
Cash and cash equivalents at beginning of year	25,610			18,491			18,606
Cash and cash equivalents at end of year	$	29,683		$	25,610		$	18,491

Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest	$	181,106		$	130,691		$	103,516
Interest capitalized	$	15,571		$	22,510		$	16,486

Supplemental disclosure of noncash investing and financing activities:
Issuance of Operating Partnership units for contributed properties	$	—		$	1,419,816		$	—
Retirement of Operating Partnership units	$	—		$	(1,419,816	)	$	—
Transfer from real estate under development to rental properties	$	308,704		$	10,203		$	68
Transfer from real estate under development to co-investments	$	6,234		$	83,574		$	27,906
Reclassification to redeemable noncontrolling interest from additional paid in capital and noncontrolling interest	$	22,387		$	18,766		$	—
Debt assumed in connection with acquisition of co-investment	$	114,435		$	—		$	—
Mortgage notes (excluding BRE merger) assumed in connection with purchases of real estate including the loan premiums recorded	$	—		$	72,568		$	—

See accompanying notes to consolidated financial statements

F- 11

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2015 and 2014

(Dollars in thousands, except per unit amounts)



	2015			2014
ASSETS
Real estate:
Rental properties:
Land and land improvements	$	2,522,842		$	2,424,930
Buildings and improvements	9,808,627			8,819,751
	12,331,469			11,244,681
Less: accumulated depreciation	(1,949,892		)	(1,564,806		)
	10,381,577			9,679,875
Real estate under development	242,326			429,096
Co-investments	1,036,047			1,042,423
Real estate held for sale, net	26,879			56,300
	11,686,829			11,207,694
Cash and cash equivalents-unrestricted	29,683			25,610
Cash and cash equivalents-restricted	93,372			70,139
Marketable securities and other investments	137,485			117,240
Notes and other receivables	19,285			24,923
Acquired in-place lease value, net	2,857			47,748
Prepaid expenses and other assets	35,580			33,378
Total assets	$	12,005,091		$	11,526,732
LIABILITIES AND CAPITAL
Unsecured debt, net	$	3,088,680		$	2,603,548
Mortgage notes payable, net	2,215,077			2,234,317
Lines of credit, net	11,707			242,824
Accounts payable and accrued liabilities	131,415			135,162
Construction payable	40,953			30,892
Distributions payable	100,266			88,221
Other liabilities	34,518			32,444
Total liabilities	5,622,616			5,367,408
Commitments and contingencies
Redeemable noncontrolling interest	45,452			23,256
Capital:
General Partner:
Common equity (65,379,359 and 63,682,646 units issued and outstanding, respectively)	6,208,535			6,002,915
Series H 7.125% Preferred interest (liquidation value of $73,750)	71,209			71,209
	6,279,744			6,074,124
Limited Partners:
Common equity (2,214,545 and 2,168,158 units issued and outstanding, respectively)	47,235			48,665
Accumulated other comprehensive loss	(39,598		)	(49,356		)
Total partners' capital	6,287,381			6,073,433
Noncontrolling interest	49,642			62,635
Total capital	6,337,023			6,136,068
Total liabilities and capital	$	12,005,091		$	11,526,732

See accompanying notes to consolidated financial statements

F- 12

ESSEX PORTFOLIO, L.P. AND SUBSIDIARES

Consolidated Statements of Income

Years ended December 31, 2015, 2014, and 2013

(Dollars in thousands, except per unit and unit amounts)



	2015			2014			2013
Revenues:
Rental and other property	$	1,185,498		$	961,591		$	603,327
Management and other fees from affiliates	8,909			9,347			7,263
	1,194,407			970,938			610,590
Expenses:
Property operating, excluding real estate taxes	234,953			204,673			140,060
Real estate taxes	128,555			107,873			57,276
Depreciation and amortization	453,423			360,592			192,420
General and administrative	40,090			40,878			26,684
Merger and integration expenses	3,798			53,530			4,284
Acquisition and investment related costs	2,414			1,878			1,161
	863,233			769,424			421,885
Earnings from operations	331,174			201,514			188,705
Interest expense	(204,827		)	(164,551		)	(116,524		)
Total return swap income	5,655			—			—
Interest and other income	19,143			11,811			11,633
Equity income from co-investments	21,861			39,893			55,865
Loss on early retirement of debt, net	(6,114		)	(268		)	(300		)
Gains on sale of real estate and land	47,333			46,039			1,503
Gains on remeasurement of co-investment	34,014			—			—
Income before discontinued operations	248,239			134,438			140,882
Income from discontinued operations	—			—			31,173
Net income	248,239			134,438			172,055
Net income attributable to noncontrolling interest	(8,295		)	(7,421		)	(6,834		)
Net income attributable to controlling interest	239,944			127,017			165,221
Preferred interest distributions	(5,255		)	(5,291		)	(5,472		)
Net income available to common unitholders	$	234,689		$	121,726		$	159,749
Per unit data:
Basic:
Income before discontinued operations available to common unitholders	$	3.50		$	2.07		$	3.27
Income from discontinued operations	—			—			0.79
Net income available to common unitholders	$	3.50		$	2.07		$	4.06
Weighted average number of common units outstanding during the year	67,054,184			58,771,666			39,380,385
Diluted:
Income before discontinued operations available to common unitholders	$	3.49		$	2.07		$	3.26
Income from discontinued operations	—			—			0.79
Net income available to common unitholders	$	3.49		$	2.07		$	4.05
Weighted average number of common units outstanding during the year	67,244,152			58,921,232			39,466,720

See accompanying notes to consolidated financial statements

F- 13

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2015, 2014, and 2013

(Dollars in thousands)



	2015			2014			2013
Net income	$	248,239		$	134,438		$	172,055
Other comprehensive income (loss):
Changes in fair value of cash flow hedges and reclassification to interest expense	7,893			4,168			12,614
Changes in fair value of marketable securities	1,865			6,302			(1,556		)
Reversal of unrealized gains upon the sale of marketable securities	—			(886		)	(1,767		)
Total other comprehensive income	9,758			9,584			9,291
Comprehensive income	257,997			144,022			181,346
Comprehensive income attributable to noncontrolling interest	(8,295		)	(7,421		)	(6,834		)
Comprehensive income attributable to controlling interest	$	249,702		$	136,601		$	174,512

See accompanying notes to consolidated financial statements.

F- 14

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Statements of Capital

Years ended December 31, 2015, 2014, and 2013

(Dollars and units in thousands)



	General Partner							Limited Partners						Accumulated
					Preferred							Preferred		other
	Common Equity				Equity			Common Equity				Equity		comprehensive			Noncontrolling
	Units	Amount			Amount			Units	Amount			Amount		loss, net			Interest			Total
Balances at December 31, 2012	36,443	$	1,762,856		$	71,209		2,122	$	45,593		$	—	$	(68,231	)	$	68,689		$	1,880,116
Net income	—	150,811			5,472			—	8,938			—		—			6,834			172,055
Reversal of unrealized gains upon the sale of marketable securities	—	—			—			—	—			—		(1,767		)	—			(1,767		)
Change in fair value of cash flow hedges and amortization of swap settlements	—	—			—			—	—			—		12,614			—			12,614
Changes in fair value of marketable securities	—	—			—			—	—			—		(1,556		)	—			(1,556		)
Issuance of common units under:
Stock and unit based compensation plans	65	7,244			—			—	—			—		—			—			7,244
Sale of common stock by the general partner	913	138,366			—			—	—			—		—			—			138,366
Stock and unit based compensation costs	—	(907		)	—			28	2,515			—		—			—			1,608
Redemptions	—	(3,717		)	—			—	(617		)	—		—			(1,377		)	(5,711		)
Distributions to noncontrolling interest	—	—			—			—	—			—		—			(8,016		)	(8,016		)
Distributions declared	—	(180,771		)	(5,472		)	—	(10,472		)	—		—			—			(196,715		)
Balances at December 31, 2013	37,421	1,873,882			71,209			2,150	45,957			—		(58,940		)	66,130			1,998,238
Net income	—	116,859			5,291			—	4,867			—		—			7,421			134,438
Reversal of unrealized gains upon the sale of marketable securities	—	—			—			—	—			—		(886		)	—			(886		)
Changes in fair value of derivatives and amortization of swap settlements	—	—			—			—	—			—		4,168			—			4,168
Changes in fair value of marketable securities	—	—			—			—	—			—		6,302			—			6,302
Issuance of common units under:

F- 15



Common stock issued as consideration by general partner in merger	23,067	3,774,087		—		—		—		—	—		—		3,774,087
General partner's stock based compensation	218	11,024		—		—		—		—	—		—		11,024
Sale of common stock by the general partner	2,943	532,670		—		—		—		—	—		—		532,670
Equity-based compensation costs	—	5,719		—		28		6,153		—	—		—		11,872
Reclassification of noncontrolling interest to redeemable noncontrolling interest	—	(19,823	)	—		(10	)	4,017		—	—		(5,084	)	(20,890	)
Changes in the redemption value of redeemable noncontrolling interest	—	312		—		—		—		—	—		—		312
Conversion of Series G preferred stock	34	4,349		—		—		—		—	—		—		4,349
Contributions from noncontrolling interest	—	—		—		8,561		1,419,816		—	—		—		1,419,816
Retirement of noncontrolling interest	—	—		—		(8,561	)	(1,419,816	)	—	—		—		(1,419,816	)
Distributions to noncontrolling interests	—	—		—		—		—		—	—		(4,890	)	(4,890	)
Redemptions	—	(3,374	)	—		—		(1,181	)	—	—		(942	)	(5,497	)
Distributions declared	—	(292,790	)	(5,291	)	—		(11,148	)	—	—		—		(309,229	)
Balances at December 31, 2014	63,683	6,002,915		71,209		2,168		48,665		—	(49,356	)	62,635		6,136,068
Net income	—	226,865		5,255		—		7,824		—	—		8,295		248,239
Change in fair value of derivatives and amortization of swap settlements	—	—		—		—		—		—	7,893		—		7,893
Changes in fair value of marketable securities	—	—		—		—		—		—	1,865		—		1,865
Issuance of common units under:
General partner's stock based compensation	207	26,540		—		—		—		—	—		—		26,540
Sale of common stock by the general partner	1,482	332,137		—		—		—		—	—		—		332,137
Equity based compensation costs	—	5,946		—		54		3,700		—	—		—		9,646
Changes in redemption value of redeemable noncontrolling interest	—	(2,615	)	—		—		—		—	—		—		(2,615	)
Reclassification of noncontrolling interest to redeemable noncontrolling interest	—	(7,657	)	—		—		—		—	—		(12,115	)	(19,772	)

F- 16



Distributions to noncontrolling interests	—	—			—			—		—			—		—			(8,751		)	(8,751		)
Redemptions	7	(2,199		)	—			(7	)	—			—		—			(422		)	(2,621		)
Distributions declared	—	(373,397		)	(5,255		)	—		(12,954		)	—		—			—			(391,606		)
Balances at December 31, 2015	65,379	$	6,208,535		$	71,209		2,215		$	47,235		$	—	$	(39,598	)	$	49,642		$	6,337,023

See accompanying notes to consolidated financial statements

F- 17

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2015, 2014, and 2013

(Dollars in thousands)



	2015			2014			2013
Cash flows from operating activities:
Net income	$	248,239		$	134,438		$	172,055
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	453,423			360,592			193,518
Earnings from co-investments	(21,392		)	(33,335		)	(14,613		)
Operating Partnership's share of gain on the sales of co-investments	(469		)	(6,558		)	(41,252		)
Operating distributions from co-investments	46,608			49,486			19,636
Gain on the sales of real estate and land	(47,333		)	(46,039		)	(30,725		)
Loss on early retirement of debt, net	6,114			268			300
Gains on sale of marketable securities and other investments	(598		)	(886		)	(1,767		)
Amortization of (premium) discount and financing costs, net	(19,361		)	(14,672		)	12,216
Amortization of discount on notes receivables	—			—			(844		)
Amortization of discount on marketable securities and other investments	(12,389		)	(9,325		)	(6,556		)
Non cash merger and integration expenses	—			9,025			—
Equity-based compensation	6,061			8,740			4,508
Gains on remeasurement of co-investment	(34,014		)	—			—
Changes in operating assets and liabilities:
Prepaid expenses, in-place lease value, receivables and other assets	267			15,828			(1,588		)
Accounts payable and accrued liabilities	(9,633		)	24,233			72
Other liabilities	1,887			1,517			22
Net cash provided by operating activities	617,410			493,312			304,982
Cash flows from investing activities:
Additions to real estate:
Acquisitions of real estate and acquisition related capital expenditures	(515,726		)	(387,547		)	(348,774		)
Redevelopment	(99,346		)	(81,429		)	(47,289		)
Development acquisitions of and additions to real estate under development	(157,900		)	(152,766		)	(17,757		)
Capital expenditures on rental properties	(57,277		)	(78,864		)	(56,919		)
Proceeds from insurance for property losses	16,811			35,547			—
BRE merger consideration paid	—			(555,826		)	—
Acquisition of membership interest in co-investment	(115,724		)	—			—
Dispositions of real estate	319,008			141,189			65,496
Dispositions of co-investments	31,556			13,900			—
Changes in restricted cash and refundable deposits	(14,068		)	(36,582		)	(9,149		)
Purchases of marketable securities	(14,300		)	(20,516		)	(16,442		)
Sales and maturities of marketable securities and other investments	8,907			8,753			24,172
Purchases of and advances under notes and other receivables	—			—			(56,750		)
Collections of notes and other receivables	—			76,585			53,438
Contributions to co-investments	(127,879		)	(246,006		)	(162,578		)
Non-operating distributions from co-investments	382			136,406			118,856

F- 18



Net cash used in investing activities	(725,556		)	(1,147,156		)	(453,696		)
Cash flows from financing activities:
Borrowings under debt agreements	1,345,855			2,093,406			969,061
Repayment of debt	(1,197,351		)	(1,814,020		)	(750,900		)
Additions to deferred charges	(8,034		)	(17,402		)	(7,402		)
Net proceeds from stock options exercised	26,540			11,039			4,958
Net proceeds from issuance of common units	332,137			531,379			137,749
Distributions to noncontrolling interest	(7,615		)	(4,841		)	(8,016		)
Redemption of limited partners units and noncontrolling interests	(2,621		)	(802		)	(5,711		)
Common units and preferred units and preferred interests distributions paid	(380,697		)	(278,149		)	(191,140		)
Net cash provided by financing activities	108,214			520,610			148,599
Cash acquired from the BRE merger	—			140,353			—
Cash acquired from consolidation of co-investment	4,005			—			—
Net increase (decrease) in cash and cash equivalents	4,073			7,119			(115		)
Cash and cash equivalents at beginning of year	25,610			18,491			18,606
Cash and cash equivalents at end of year	$	29,683		$	25,610		$	18,491

Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest	$	181,106		$	130,691		$	103,516
Interest capitalized	$	15,571		$	22,510		$	16,486

Supplemental disclosure of noncash investing and financing activities:
Issuance of Operating Partnership units for contributed properties	$	—		$	1,419,816		$	—
Retirement of Operating Partnership units	$	—		$	(1,419,816	)	$	—
Transfer from real estate under development to rental properties	$	308,704		$	10,203		$	68
Transfer from real estate under development to co-investments	$	6,234		$	83,574		$	27,906
Reclassification to redeemable noncontrolling interest from additional paid in capital and noncontrolling interest	$	22,387		$	18,766		$	—
Debt assumed in connection with acquisition of co-investment	$	114,435		$	—		$	—
Mortgage notes (excluding BRE merger) assumed in connection with purchases of real estate including the loan premiums recorded	$	—		$	72,568		$	—

See accompanying notes to consolidated financial statements

F- 19

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

(1) Organization

The accompanying consolidated financial statements present the accounts of Essex Property Trust, Inc. (“Essex”, “ESS”, or the “Company”), which include the accounts of the Company and Essex Portfolio, L.P. and subsidiaries (the “Operating Partnership,” which holds the operating assets of the Company). Unless otherwise indicated, the notes to consolidated financial statements apply to both the Company and the Operating Partnership.

ESS is the sole general partner in the Operating Partnership with a 96.7% general partner interest and the limited partners owned a 3.3% interest as of December 31, 2015. The limited partners may convert their Operating Partnership units into an equivalent number of shares of common stock. Total Operating Partnership limited partnership units outstanding were 2,214,545 and 2,168,158 as of December 31, 2015 and 2014, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $530.2 million and $447.9 million, as of December 31, 2015 and 2014, respectively. The Company has reserved shares of common stock for such conversions.

As of December 31, 2015, the Company owned or had ownership interests in 246 apartment communities, (aggregating 59,160 apartment homes), four commercial buildings, and eight active development projects (collectively, the “Portfolio”). The communities are located in Southern California (Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas.

On April 1, 2014, Essex completed the merger with BRE Properties, Inc. (“BRE”). In connection with the closing of the merger, (1) BRE merged into a wholly owned subsidiary of Essex, and (2) each outstanding share of BRE common stock was converted into (i) 0.2971 shares (the “Stock Consideration”) of Essex common stock, and (ii) $7.18 in cash, (the “Cash Consideration”), plus cash in lieu of fractional shares for total consideration of approximately $4.3 billion. The Cash Consideration was adjusted as a result of the authorization and declaration of a special distribution to the stockholders of BRE of $5.15 per share of BRE common stock payable to BRE stockholders of record as of the close of business on March 31, 2014 (the “Special Dividend”). The Special Dividend was payable as a result of the closing of the sale of certain interests in assets of BRE to certain parties, which closed on March 31, 2014. Pursuant to the terms of the merger agreement, the amounts payable as a Special Dividend reduced the Cash Consideration of $12.33 payable by Essex in the merger to $7.18 per share of BRE common stock.

Essex issued approximately 23.1 million shares of Essex common stock as Stock Consideration in the merger. For purchase accounting, the value of the common stock issued by Essex upon the consummation of the merger was determined based on the closing price of BRE’s common stock on the closing date of the merger. As a result of Essex being admitted to the S&P 500 on the same date as the closing of the merger, Essex’s common stock price experienced significantly higher than usual trading volume and the closing price of $174 per share was significantly higher than its volume-weighted average trading price for the days before and after April 1, 2014. BRE’s common stock did not experience the same proportionate increase in common stock price leading up to April 1, 2014. As a result, given that a substantial component of the purchase price is an exchange of equity instruments, Essex used the closing price of BRE’s common stock on April 1, 2014 of $61 per share, less the Cash Consideration, as the fair value of the equity consideration. After deducting the Special Dividend and the Cash Consideration per share, this resulted in a value of $48.67 per share of BRE common stock which is the equivalent of approximately $164 per share of Essex common stock issued.

(2) Summary of Critical and Significant Accounting Policies

(a) Principles of Consolidation and Basis of Presentation

The accounts of the Company, its controlled subsidiaries and the variable interest entities (“VIEs”) in which it is the primary beneficiary are consolidated in the accompanying financial statements and prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included and are normal and recurring in nature. All significant inter-company accounts and transactions have been eliminated. Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation. Such reclassifications had no net effect on previously reported financial results.

F- 20

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

Noncontrolling interest includes the 3.3% limited partner interests in the Operating Partnership not held by the Company at both December 31, 2015 and 2014. These percentages include the Operating Partnership’s vested long term incentive plan units (see Note 13).

The Company consolidates the Operating Partnership and 19 DownREIT limited partnerships (comprising eleven communities), since the Company is the primary beneficiary of these variable interest entities (“VIEs”). The Company has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to these DownREIT VIEs, net of intercompany eliminations, were approximately $241.0 million and $206.7 million, respectively, as of December 31, 2015, and $235.1 million and $209.1 million, respectively, as of December 31, 2014.

The DownREIT VIEs collectively own eleven apartment communities in which Essex Management Company (“EMC”) is the general partner, the Operating Partnership is a special limited partner, and the other limited partners were granted rights of redemption for their interests. Such limited partners can request to be redeemed and the Company, subject to certain restrictions, can elect to redeem their rights for cash or by issuing shares of its common stock on a one share per unit basis. Conversion values will be based on the market value of the Company's common stock at the time of redemption multiplied by the number of units stipulated under the above arrangements. The other limited partners receive distributions based on the Company's current dividend rate times the number of units held. Total DownREIT units outstanding were 963,172 and 974,790 as of December 31, 2015 and 2014 respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $230.6 million and $201.4 million, as of December 31, 2015 and 2014, respectively. The carrying value of redeemable noncontrolling interest in the accompanying balance sheets was $45.5 million and $23.3 million as of December 31, 2015 and 2014, respectively. The amounts represent units of limited partners' interests in DownREIT VIEs as to which it is outside of the Company’s control to redeem the DownREIT units with Company common stock and may potentially be redeemed for cash, and are presented at either their redemption value or historical cost, depending on the limited partner's right to redeem their units as of the balance sheet date. The carrying value of DownREIT units as to which it is within the control of the Company to redeem the units with its common stock is $18.4 million and $30.8 million as of December 31, 2015 and 2014, respectively and is classified within noncontrolling interests in the accompanying consolidated balance sheets.

Interest holders in VIEs consolidated by the Company are allocated a priority of net income equal to the cash payments made to those interest holders or distributions from cash flow. The remaining results of operations are generally allocated to the Company.

As of December 31, 2015 and 2014, the Company did not have any VIEs of which it was not deemed to be the primary beneficiary.

(b) Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The new standard provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries. The new standard requires an entity to recognize revenue to reflect the transfer of goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. In August 2015, the FASB deferred the effective date of the new standard by one year, and it is now effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted but not before the original effective date. The new standard may be applied using either a full retrospective or a modified approach upon adoption. The Company has not yet selected a transition method and is currently evaluating the impact of adopting the new standard on its consolidated results of operations and financial position.

In February 2015, the FASB issued ASU No. 2015-02 "Consolidation (Topic 810): Amendments to the Consolidation Analysis", which provides new consolidation guidance and makes changes to both the variable interest model and the voting model. Among other changes, the new standard specifically eliminates the presumption in the current voting model that a general partner controls a limited partnership or similar entity unless that presumption can be overcome. Generally, only a single limited partner that is able to exercise substantive kick-out rights will consolidate. The new standard will be effective for the Company beginning on January 1, 2016 and early adoption is permitted, including adoption in an interim period. The new standard must be applied using a modified retrospective approach by recording a cumulative-effect adjustment to equity/capital

F- 21

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

as of the beginning of the period of adoption or retrospectively to each period presented. The Company is currently evaluating the impact of adopting the new standard on its consolidated results of operations and financial position.

In April 2015, the FASB issued ASU No. 2015-03 "Simplifying the Presentation of Debt Issuance Costs", which requires companies to present debt financing costs as a direct deduction from the carrying amount of the associated debt liability rather than as an asset, consistent with the presentation of debt discounts on the consolidated balance sheets. The new standard will be effective for the Company beginning on January 1, 2016 and early adoption is permitted. The Company adopted this standard during the second quarter of 2015. This adoption resulted in a reclassification of $29.4 million in debt issuance costs, net of accumulated amortization, from an asset to a reduction to associated debt liabilities as of December 31, 2014.

In January 2016, the FASB issued ASU No. 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities", which requires changes to the classification and measurement of investments in certain equity securities and to the presentation of certain fair value changes for financial liabilities measured at fair value. The new standard will be effective for the Company beginning on January 1, 2018 and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated results of operations and financial position.

Significant expenditures, which improve or extend the life of an asset and have a useful life of greater than one year, are capitalized. Operating real estate assets are stated at cost and consist of land, buildings and improvements, furniture, fixtures and equipment, and other costs incurred during their development, redevelopment and acquisition. Expenditures for maintenance and repairs are charged to expense as incurred.

The depreciable life of various categories of fixed assets is as follows:



Computer software and equipment	3 - 5 years
Interior apartment home improvements	5 years
Furniture, fixtures and equipment	5 years
Land improvements and certain exterior components of real property	10 years
Real estate structures	30 years

The Company capitalizes all costs incurred with the predevelopment, development or redevelopment of real estate assets or are associated with the construction or expansion of real property. Such capitalized costs include land, land improvements, allocated costs of the Company’s project management staff, construction costs, as well as interest and related loan fees, property taxes and insurance. Capitalization begins for predevelopment, development, and redevelopment projects when activity commences. Capitalization ends when the apartment home is completed and the property is available for a new resident or if the development activities cease.

The Company allocates the purchase price of real estate to land and building including personal property, and identifiable intangible assets, such as the value of above, below and in-place leases. The values of the above and below market leases are amortized and recorded as either a decrease (in the case of above market leases) or an increase (in the case of below market leases) to rental revenue over the remaining term of the associated leases acquired, which in the case of below market leases the Company assumes lessees will elect to renew their leases. The value of acquired in-place leases are amortized to expense over the term the Company expects to retain the acquired tenant, which is generally 15 months. The net carrying value of acquired in-place leases as of December 31, 2015 of $2.9 million is expected to be recognized in amortization expense primarily in 2016.

The Company performs the following evaluation for communities acquired:


(1)	adjust the purchase price for any fair value adjustments resulting from such things as assumed debt or contingencies;


(2)	estimate the value of the real estate “as if vacant” as of the acquisition date;


(3)	allocate that value among land and buildings including personal property;


(4)	compute the value of the difference between the “as if vacant” value and the adjusted purchase price, which will represent the total intangible assets;

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013


(5)	compute the value of the above and below market leases and determine the associated life of the above market/ below market leases;


(6)	compute the value of the in-place leases and customer relationships, if any, and the associated lives of these assets.

Whenever events or changes in circumstances indicate that the carrying amount of a property held for investment or held for sale may not be fully recoverable, the carrying amount will be evaluated for impairment. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount (including intangible assets) of a property held for investment, then the Company will recognize an impairment loss equal to the excess of the carrying amount over the fair value of the property. Fair value of a property is determined using conventional real estate valuation methods, such as discounted cash flow, the property’s unleveraged yield in comparison to the unleveraged yields and sales prices of similar communities that have been recently sold, and other third party information, if available. Communities held for sale are carried at the lower of cost and fair value less estimated costs to sell. As of December 31, 2015 and 2014, two and one properties were classified as held for sale, respectively. No impairment charges were recorded in 2015, 2014 or 2013.

In the normal course of business, the Company will receive purchase offers for its communities, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. The Company classifies real estate as "held for sale" when all criteria under the accounting standard for the disposals of long-lived assets have been met.

(d) Co-investments

The Company owns investments in joint ventures (“co-investments”) in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with the accounting standards. Therefore, the Company accounts for these investments using the equity method of accounting. Under the equity method of accounting, the investment is carried at the cost of assets contributed, plus the Company’s equity in earnings less distributions received and the Company’s share of losses.

A majority of the co-investments, excluding the preferred equity investments, compensate the Company for its asset management services and some of these investments may provide promote distributions if certain financial return benchmarks are achieved. Asset management fees are recognized when earned, and promote fees are recognized when the earnings events have occurred and the amount is determinable and collectible. Any promote fees are reflected in equity income (loss) from co-investments.

(e) Revenues and Gains on Sale of Real Estate

Revenues from tenants renting or leasing apartment homes are recorded when due from tenants and are recognized monthly as they are earned, which is not materially different than on a straight-line basis. Apartment homes are rented under short-term leases (generally, lease terms of 6 to 12 months). Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease.

The Company recognizes gains on sales of real estate when a contract is in place, a closing has taken place, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property and the Company does not have a substantial continuing involvement with the property.

(f) Cash Equivalents and Restricted Cash

Highly liquid investments with original maturities of three months or less when purchased are classified as cash equivalents. Restricted cash balances relate primarily to reserve requirements for capital replacement at certain communities in connection with the Company’s mortgage debt.

(g) Marketable Securities and Other Investments

The Company reports its available for sale securities at fair value, based on quoted market prices (Level 1 for the common stock and investment funds, Level 2 for the unsecured bonds and Level 3 for the limited partnership interests, as defined by the

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

FASB standard for fair value measurements as discussed later in Note 2), and any unrealized gain or loss is recorded as other comprehensive income (loss). There were no other than temporary impairment charges for the years ended December 31, 2015, 2014, and 2013. Realized gains and losses, interest income, and amortization of purchase discounts are included in interest and other income on the consolidated statement of income.

As of December 31, 2015 and 2014, marketable securities and other investments consisted primarily of investment-grade unsecured bonds, common stock, investments in mortgage backed securities, investment funds that invest in U.S. treasury or agency securities, and other limited partnership investments. As of December 31, 2015 and 2014, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost. The discount on the mortgage backed securities is being amortized to interest income based on an estimated yield and the maturity date of the securities.

As of December 31, 2015 and 2014 marketable securities and other investments consist of the following ($ in thousands):



	December 31, 2015
	Amortized Cost		Gross Unrealized Gain (Loss)			Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	11,618	$	68		$	11,686
Investment funds - US treasuries	3,675		(9		)	3,666
Common stock and stock funds	34,655		7,091			41,746
Held to maturity:
Mortgage backed securities	80,387		—			80,387
Total - Marketable securities and other investments	$	130,335	$	7,150		$	137,485



	December 31, 2014
	Amortized Cost		Gross Unrealized Gain		Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	9,435	$	145	$	9,580
Investment funds - US treasuries	3,769		3		3,772
Common stock and stock funds	25,755		5,137		30,892
Held to maturity:
Mortgage backed securities	67,996		—		67,996
Total - Marketable securities	106,955		5,285		112,240
Other investments	5,000		—		5,000
Total - Marketable securities and other investments	$	111,955	$	5,285	$	117,240

The Company uses the specific identification method to determine the cost basis of a security sold and to reclassify amounts from accumulated other comprehensive income for securities sold. For the years ended December 31, 2015, 2014 and 2013, the proceeds from sales of available for sale securities totaled $3.3 million, $8.8 million and $24.2 million, respectively. For the years ended December 31, 2015, 2014 and 2013 these sales resulted in no net gains or losses, gains of $0.9 million and $1.8 million, respectively. For the year ended December 31, 2015, the proceeds from the sale of other investments totaled $5.6 million, which resulted in a realized gain of $0.6 million recorded in interest and other income on the consolidated statements of income. For the years ended December 31, 2014 and 2013, there were no such sales.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

(h) Notes Receivable

Notes receivable relate to real estate financing arrangements including mezzanine and bridge loans and are secured by real estate. Interest is recognized over the life of the note as interest income.

Each note is analyzed to determine if it is impaired. A note is impaired if it is probable that the Company will not collect all contractually due principal and interest. The Company does not accrue interest when a note is considered impaired and an allowance is recorded for any principal and previously accrued interest that are not believed to be collectible. All cash receipts on impaired notes are applied to reduce the principal amount of such notes until the principal has been recovered and, thereafter, are recognized as interest income. As of December 31, 2015 and 2014, no notes were impaired.

(i) Capitalization Policy

The Company capitalizes all direct and certain indirect costs, including interest, real estate taxes and insurance, incurred during development and redevelopment activities. Interest is capitalized on real estate assets that require a period of time to get them ready for their intended use. The amount of interest capitalized is based upon the average amount of accumulated development expenditures during the reporting period. Included in capitalized costs are management’s estimates of the direct and incremental personnel costs and indirect project costs associated with the Company's development and redevelopment activities. Indirect project costs consist primarily of personnel costs associated with construction administration and development, including accounting, legal fees, and various corporate and community onsite costs that clearly relate to projects under development. The Company’s capitalized internal costs related to development and redevelopment projects were comprised primarily of employee compensation and totaled $10.9 million, $10.4 million and $7.5 million for the years ended December 31, 2015, 2014 and 2013, respectively, most of which relates to development projects. The Company capitalizes leasing costs associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized are immaterial for all periods presented.

(j) Fair Value of Financial Instruments

The Company values its financial instruments based on the fair value hierarchy of valuation techniques described in the FASB’s accounting standard for fair value measurements. Level 1 inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability. The Company uses Level 1 inputs for the fair values of its cash equivalents and its marketable securities except for unsecured bonds and mortgage backed securities. The Company uses Level 2 inputs for its investments in unsecured bonds, notes receivable, notes payable, and derivative liabilities. These inputs include interest rates for similar financial instruments. The Company’s valuation methodology for derivatives is described in Note 9. The Company uses Level 3 inputs to estimate the fair value of its mortgage backed securities. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Management believes that the carrying amounts of the outstanding balances under its notes and other receivables approximate fair value as of December 31, 2015 and 2014, because interest rates, yields and other terms for these instruments are consistent with yields and other terms currently available for similar instruments. Management has estimated that the fair value of fixed rate debt with a carrying value of $4.8 billion and $4.4 billion, at December 31, 2015 and 2014, respectively, to be $4.8 billion and $4.6 billion. Management has estimated the fair value of the Company’s $525.3 million and $651.7 million of variable rate debt at December 31, 2015 and 2014, respectively, is $527.6 million and $656.3 million based on the terms of the Company’s existing variable rate debt compared to those available in the marketplace. Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payable, other liabilities and dividends payable approximate fair value as of December 31, 2015 and 2014 due to the short-term maturity of these instruments. Marketable securities and derivative liabilities are carried at fair value as of December 31, 2015 and 2014.

At December 31, 2015 and 2014, the Company’s investments in mortgage backed securities had a carrying value of $80.4 million and $68.0 million, respectively. The Company estimated the fair value of investment in mortgage backed securities at December 31, 2015 and 2014 to be approximately $110.2 million and $96.0 million, respectively. The Company determines the fair value of the mortgage backed securities based on unobservable inputs (level 3 of the fair value hierarchy) considering the

F- 25

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

assumptions that market participants would make in valuing these securities. Assumptions such as estimated default rates and discount rates are used to determine expected, discounted cash flows to estimate the fair value.

(k) Interest Rate Protection, Swap, and Forward Contracts

The Company uses interest rate swaps, interest rate cap contracts, and forward starting swaps to manage interest rate risks. The Company’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps and interest rate caps as part of its cash flow hedging strategy.

The Company records all derivatives on its consolidated balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated for accounting purposes as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated for accounting purposes as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the initial and ongoing effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

For derivatives not designated for accounting purposes as cash flow hedges, changes in fair value are recognized in earnings. All of the Company’s interest rate swaps are considered cash flow hedges. The change in fair value of the total return swaps is reported as total return swap income in the consolidated statements of income.

(l) Income Taxes

Generally in any year in which ESS qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code (the “IRC”), it is not subject to federal income tax on that portion of its income that it distributes to stockholders. No provision for federal income taxes, other than the taxable REIT subsidiaries discussed below, has been made in the accompanying consolidated financial statements for each of the years in the three-year period ended December 31, 2015 as ESS has elected to be and believes it qualifies under the IRC as a REIT and has made distributions during the periods in amounts to preclude ESS from paying federal income tax.

In order to maintain compliance with REIT tax rules, the Company utilizes taxable REIT subsidiaries for various revenue generating or investment activities. The taxable REIT subsidiaries are consolidated by the Company. The activities and tax related provisions, assets and liabilities are not material.

As a partnership, the Operating Partnership is not subject to federal or state income taxes except that in order to maintain ESS’s compliance with REIT tax rules that are applicable to ESS, the Operating Partnership utilizes taxable REIT subsidiaries for various revenue generating or investment activities. The taxable REIT subsidiaries are consolidated by the Operating Partnership.

F- 26

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The status of cash dividends distributed for the years ended December 31, 2015, 2014, and 2013 related to common stock, Series G and Series H preferred stock are classified for tax purposes as follows:



	2015		2014		2013
Common Stock
Ordinary income	99.28	%	70.03	%	77.34	%
Capital gain	0.72	%	21.95	%	17.64	%
Unrecaptured section 1250 capital gain	—	%	8.02	%	5.02	%
	100.00	%	100.00	%	100.00	%



	2015		2014		2013
Series G and H Preferred stock
Ordinary income	99.28	%	70.03	%	77.34	%
Capital gains	0.72	%	21.95	%	17.64	%
Unrecaptured section 1250 capital gain	—	%	8.02	%	5.02	%
	100.00	%	100.00	%	100.00	%

(m) Equity-based Compensation

The cost of share and unit based compensation awards is measured at the grant date based on the estimated fair value of the awards. The estimated fair value of stock options and restricted stock granted by the Company are being amortized over the vesting period. The estimated grant date fair values of the long term incentive plan units (discussed in Note 13) are being amortized over the expected service periods.

(n) Changes in Accumulated Other Comprehensive Loss by Component

Essex Property Trust, Inc. ($ in thousands)



	Change in fair value and amortization of swap settlements			Unrealized gains on available for sale securities		Total
Balance at December 31, 2014	$	(56,003	)	$	4,551	$	(51,452	)
Other comprehensive income before reclassification	(393		)	1,804		1,411
Amounts reclassified from accumulated other comprehensive loss	8,030			—		8,030
Other comprehensive income	7,637			1,804		9,441
Balance at December 31, 2015	$	(48,366	)	$	6,355	$	(42,011	)

F- 27

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

Essex Portfolio, L.P. ($ in thousands)



	Change in fair value and amortization of swap settlements			Unrealized gains on available for sale securities		Total
Balance at December 31, 2014	$	(53,980	)	$	4,624	$	(49,356	)
Other comprehensive income before reclassification	(407		)	1,865		1,458
Amounts reclassified from accumulated other comprehensive loss	8,300			—		8,300
Other comprehensive income	7,893			1,865		9,758
Balance at December 31, 2015	$	(46,087	)	$	6,489	$	(39,598	)

Amounts reclassified from accumulated other comprehensive loss in connection with derivatives are recorded to interest expense on the consolidated statements of income. Realized gains and losses on available for sale securities are included in interest and other income on the consolidated statements of income.

(o) Accounting Estimates

The preparation of consolidated financial statements, in accordance with GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate portfolio, its investments in and advances to joint ventures and affiliates, and its notes receivable. The Company bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.

(p) BRE Merger

The merger with BRE was a two-step process. First, 14 of the BRE properties were acquired on March 31, 2014 in exchange for $1.4 billion of OP units. The preliminary fair value of these properties was substantially all attributable to rental properties which included land, buildings and improvements, and real estate under development and approximately $19 million was attributable to acquired in-place lease value. Second, the BRE merger closed on April 1, 2014 in exchange for the total consideration of approximately $4.3 billion.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

A summary of the fair value of the assets and liabilities acquired on April 1, 2014 was as follows (includes the 14 properties acquired on March 31, 2014 as the OP Units issued were retired on April 1, 2014) (in millions):



Cash assumed	$	140
Rental properties and real estate under development	5,605
Real estate held for sale, net	108
Co-investments	224
Acquired in-place lease value	77
Other assets	16
Mortgage notes payable and unsecured debt	(1,747		)
Other liabilities	(87		)
Redeemable noncontrolling interest	(5		)
	$	4,331

Cash consideration for BRE merger	$	556
Equity consideration for BRE merger	3,775
Total consideration for BRE merger	$	4,331

During the quarter ended March 31, 2015 the Company recorded adjustments to decrease the preliminary fair value of real property by $13.1 million, to increase the preliminary fair value of co-investments by $6.0 million and to decrease its preliminary estimate for liabilities assumed by $7.1 million. The change in estimates were the result of subsequent additional information pertaining to the opening balance sheet identified by management. The Company believes that the information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. Due to these adjustments and, certain amounts do not agree to previously reported balances.

(3) Real Estate Investments

(a) Acquisitions of Real Estate

For the year ended December 31, 2015, the Company purchased seven communities consisting of 1,722 apartment homes for $638.1 million. The table below summarizes acquisition activity for the year ended December 31, 2015 ($ in millions):



Property Name	Location	Apartment Homes	Essex Ownership Percentage		Quarter in 2015	Purchase Price
8th & Hope	Los Angeles, CA	290	100	%	Q1	$	200.0
The Huxley (1)	Los Angeles, CA	187	100	%	Q1	48.8
The Dylan (1)	Los Angeles, CA	184	100	%	Q1	51.3
Reveal (2)	Woodland Hills, CA	438	99.75	%	Q2	73.0
Avant	Los Angeles, CA	247	100	%	Q2	99.0
Avant II	Los Angeles, CA	193	100	%	Q4	73.0
Enso	San Jose, CA	183	100	%	Q4	93.0
Total 2015		1,722				$	638.1


(1)	In March 2015, the Company purchased the joint venture partner's remaining membership interest in The Huxley and The Dylan co-investments for a purchase price of $100.1 million. The properties are now consolidated.


(2)	In April 2015, the Company purchased the joint venture partner's 49.5% membership interest in the Reveal co-investment for a purchase price of $73.0 million. The property is now consolidated.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The $638.1 million aggregate purchase price for the acquisitions listed above were included on the Company's consolidated balance sheet as follows: $117.9 million was included in land and land improvements, $513.3 million was included in buildings and improvements, $5.3 million was included in acquired in-place lease value, net, and $1.6 million was included in other financial statement line items within the Company's consolidated balance sheets.

For the year ended December 31, 2014, in additional to the BRE merger, the Company purchased six communities consisting of 1,480 apartment homes for $460.7 million.

(b) Sales of Real Estate Investments

For the year ended December 31, 2015, the Company sold two communities consisting of 848 apartment homes for $308.8 million resulting in gains totaling $44.9 million. The table below summarized disposition activity for the year ended December 31, 2015 ($ in millions):



Property Name	Location	Apartment Homes	Essex Ownership Percentage		Ownership	Quarter in 2015	Sales Price		Gains
Pinnacle South Mountain	Phoenix, AZ	552	100	%	EPLP	Q1	$	63.8	$	4.7
Sharon Green	Menlo Park, CA	296	100	%	EPLP	Q4	245.0		40.2
Total 2015		848					$	308.8	$	44.9

In March 2015, the Company sold two commercial buildings, located in Emeryville, CA for $13.0 million, resulting in a gain of $2.4 million.

During 2014, the Company sold four communities consisting of 594 apartment homes for $120.4 million resulting in gains totaling $43.6 million, which are included in the line item gains on sale of real estate and land in the Company's consolidated statement of income.

During 2013, the Company sold three communities consisting of 363 apartment homes for $57.5 million resulting in gains totaling $29.2 million, which are included in the line item gains on sale of real estate and land in the Company's consolidated statement of income.

The Company has joint ventures and preferred equity investments in co-investments which are accounted for under the equity method. The co-investments’ accounting policies are similar to the Company’s accounting policies. The co-investments own, operate, and develop apartment communities.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The carrying values of the Company’s co-investments as of December 31, 2015 and 2014 are as follows ($ in thousands):



	Ownership		December 31,
	Percentage		2015		2014
Membership interest/Partnership interest in:
CPPIB	50%-55%		$	329,723	$	336,977
Wesco I, III and IV	50	%	218,902		256,790
BEXAEW	50	%	88,850		97,686
Palm Valley	50	%	68,525		70,186
Other	28%-55%		32,927		50,438
Total operating co-investments			738,927		812,077
Total development co-investments	50%-55%		190,808		121,655
Total preferred interest co-investments (includes related party investments of $35.8 million and $40.8 million as of December 31, 2015 and December 31, 2014, respectively)			106,312		108,691
Total co-investments			$	1,036,047	$	1,042,423

The combined summarized financial information of co-investments is as follows ($ in thousands):



	December 31,
	2015		2014
Combined balance sheets: (1)
Rental properties and real estate under development	$	3,360,360	$	3,426,574
Other assets	96,785		107,902
Total assets	$	3,457,145	$	3,534,476
Debt	$	1,499,601	$	1,568,398
Other liabilities	92,241		91,579
Equity	1,865,303		1,874,499
Total liabilities and equity	$	3,457,145	$	3,534,476
Company's share of equity	$	1,036,047	$	1,042,423



	Years ended December 31,
	2015			2014			2013
Combined statements of income: (1)
Property revenues	$	260,175		$	188,548		$	100,402
Property operating expenses	(93,067		)	(71,419		)	(37,518		)
Net operating income	167,108			117,129			62,884
Gain on sale of real estate	14			23,333			146,758
Interest expense	(44,834		)	(39,990		)	(24,155		)
General and administrative	(5,879		)	(6,321		)	(5,344		)
Equity income from co-investments (2)	—			26,798			18,703
Depreciation and amortization	(103,613		)	(74,657		)	(36,831		)
Net income	$	12,796		$	46,292		$	162,015
Company's share of net income (3)	$	21,861		$	39,893		$	55,865


(1)	Includes preferred equity investments held by the Company.


(2)	Represents income from Wesco II's preferred equity investment in Park Merced.

F- 31

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013


(3)	Includes the Company's share of equity income from co-investments, income from preferred equity investments, gain on sale of co-investments, co-investment promote income, and income from early redemption of preferred equity investments. Includes income earned from investments with a related party of $3.7 million and $3.8 million for the years ended December 31, 2015 and 2014, respectively.

Operating Co-investments

As of December 31, 2015 and 2014, the Company, through several joint ventures, owned 10,520 and 9,983 apartment homes, respectively, in operating communities. The Company generally owns 50%-55% of these joint ventures and the Company’s book value of these co-investments was $738.9 million and $812.1 million at December 31, 2015 and 2014, respectively.

Development Co-Investments

As of December 31, 2015 and 2014, the Company, through several joint ventures, owned 1,676 and 2,296 apartment homes, respectively, in development communities. The Company generally owns 50%-55% of these joint ventures and the Company’s book value of these co-investments was $190.8 million and $121.7 million at December 31, 2015 and 2014, respectively.

In February 2015, the Company entered into a joint venture to develop 500 Folsom, a multi-family community comprised of 545 apartment homes located in San Francisco, California. The Company has a 50% ownership interest in the development which has a projected total cost of $381.0 million. Construction began in the fourth quarter of 2015 and the property is expected to open in the fourth quarter of 2018. At December 31, 2015, the total remaining estimated costs to be incurred on this project were $319.2 million, of which the Company’s portion of the remaining costs was $159.6 million.

In July 2014, the Company entered into a joint venture to develop Century Towers, a multi-family community containing 376 apartment homes located in San Jose, California. The Company has a 50% ownership interest in the development which has a projected total cost of $172.1 million. The Company has also committed to a $27.0 million preferred equity investment in the project, which accrues at an annualized preferred return of 8.1%. Construction began in the third quarter of 2014 and the property is expected to open in the first quarter of 2017. At December 31, 2015, the total remaining estimated costs to be incurred on this project were $78.9 million, of which the Company’s portion of the remaining costs was $39.4 million.

Preferred Equity Investments

As of December 31, 2015 and 2014, the Company held preferred equity investment interests in several joint-ventures which own real estate. The Company’s book value of these preferred equity investments was $106.3 million and $108.7 million at December 31, 2015 and 2014, respectively.

In March 2015, a multi-family property, located in Anaheim, CA that was owned by an entity affiliated with a related party, in which the Company held a $13.7 million preferred equity investment, was sold. That investment of $13.7 million plus an additional $1.3 million in cash was invested as outlined in the next paragraph. Prior to the property sale, the $13.7 million preferred equity investment earned a 9.0% preferred return and was scheduled to mature in September 2020.

In June 2015, the Company made $10.0 million and $5.0 million preferred equity investments in limited liability companies owned by a related party, that own properties located in San Jose and Concord, California, respectively. These investments earn a 9.5% preferred return and are scheduled to mature in June 2022.

In August 2015, the Company made a $5.0 million preferred equity investment in a limited liability company owned by a related party that owns a property located in Los Angeles, California. This investment earns a 9.5% preferred return and is scheduled to mature in August 2022.

In August 2015, the Company redeemed a preferred equity investment in a joint venture that holds a property in San Jose, California with a carrying value of $20.4 million. The Company recognized a gain of $1.5 million as a result of this redemption which is included in equity income from co-investments in the consolidated statements of income.

In October 2014, the Company received cash of $101.0 million for its share of the redemption of a preferred equity investment related to a property located in San Francisco, California. The Company recorded $5.3 million of income from penalties due to

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

the early redemption of this preferred equity investment which is included in equity income from co-investments in the consolidated statements of income.

(d) Real Estate under Development

The Company defines development projects as new communities that are being constructed, or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations. As of December 31, 2015, the Company had two consolidated development projects, six unconsolidated joint venture development projects, and various consolidated predevelopment projects, aggregating 2,447 apartment homes for an estimated total cost of $1.4 billion, of which $787.0 million remains to be expended. The Company’s portion of the remaining costs was $542.0 million.

(4) Notes and Other Receivables

Notes receivables, secured by real estate, and other receivables consist of the following as December 31, 2015 and 2014 ($ in thousands):



	2015		2014
Note receivable, secured, bearing interest at 6.0%, due December 2016	$	3,219	$	3,212
Notes and other receivables from affiliates (1)	3,092		8,105
Other receivables	12,974		13,606
	$	19,285	$	24,923


(1)	The Company had $3.1 million and $8.1 million of short-term loans outstanding and due from various joint ventures for the years ended December 31, 2015 and 2014, respectively. See Note 5, Related Party Transactions, for additional details.

(5) Related Party Transactions

The Company has adopted written related party transaction guidelines that are intended to cover transactions in which the Company (including entities it controls) is a party and in which any “related person” has a direct or indirect interest. A “related person” means any Company director, director nominee, or executive officer, any beneficial owner of more than 5% of the Company’s outstanding common stock, and any immediate family member of any of the foregoing persons. A related person may be considered to have an indirect interest in a transaction if he or she (i) is an owner, director, officer or employee of or otherwise associated with another company that is engaging in a transaction with the Company, or (ii) otherwise, through one or more entities or arrangements, has an indirect financial interest in or personal benefit from the transaction.

The related person transaction review and approval process is intended to determine, among any other relevant issues, the dollar amount involved in the transaction; the nature and value of any related person’s direct or indirect interest (if any) in the transaction; and whether or not (i) a related person’s interest is material, (ii) the transaction is fair, reasonable, and serves the best interest of the Company and its shareholders, and (iii) whether the transaction or relationship should be entered into, continued or ended.

The Company’s Chairman and founder, Mr. George Marcus, is the Chairman of the Marcus & Millichap Company (“MMC”), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr. Marcus is also the Co-Chairman of Marcus & Millichap, Inc. (“MMI”), and Mr. Marcus owns a controlling interest in MMI. MMI is a national brokerage firm listed on the NYSE that underwent its initial public offering in 2013. Essex Apartment Value Fund II, L.P. (“Fund II”) paid brokerage commissions totaling $0.6 million and $0.4 million, respectively, to an affiliate of MMI related to the sales of properties in 2013 and 2012, respectively. There were no brokerage commissions paid by the Company to MMI or its affiliates during 2015, 2014, and 2013.

The Company charges certain fees relating to its co-investments for asset management, property management, development and redevelopment services. These fees from affiliates total $15.6 million, $16.5 million, and $11.5 million for the years ended December 31, 2015, 2014 and 2013, respectively. All of these fees are net of intercompany amounts eliminated by the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

Company. The Company netted development and redevelopment fees of $6.7 million, $7.2 million, and $4.4 million against general and administrative expenses for the years ended December 31, 2015, 2014 and 2013, respectively.

In March 2015, a multi-family property, located in Anaheim, CA that was owned by an entity affiliated with MMC, in which the Company held a $13.7 million preferred equity investment, was sold. That investment of $13.7 million plus an additional $1.3 million in cash was invested as outlined in the next two paragraphs. Prior to the property sale, the $13.7 million preferred equity investment earned a 9.0% preferred return and was scheduled to mature in September 2020.

In June 2015, the Company made a $10.0 million preferred equity investment in an entity affiliated with MMC that owns Greentree Apartments, a 220 apartment community located in San Jose, CA. This investment will earn a 9.5% preferred return and is scheduled to mature in June 2022.

In June 2015, the Company made a $5.0 million preferred equity investment in an entity affiliated with MMC that owns Sterling Cove Apartments, a 218 apartment community located in Concord, CA. This investment will earn a 9.5% preferred return and is scheduled to mature in June 2022.

In August 2015, the Company made a $5 million preferred equity investment in an entity affiliated with MMC that owns Alta Vista Apartments, a 92 apartment community located in Los Angeles, CA. This investment will earn a 9.5% preferred return and is scheduled to mature in August 2022.

In July 2014, the Company acquired Paragon Apartments, a 301 unit apartment community located in Fremont, CA for $111.0 million from an entity that was partially owned by an affiliate of MMC.

As described in Note 4, the Company has provided short-term bridge loans to affiliates. As of December 31, 2015 and 2014, $3.1 million and $8.1 million, respectively, of short-term loans remained outstanding due from joint venture affiliates and is classified within notes and other receivables in the accompanying consolidated balance sheets.

In January 2013, the Company invested $8.6 million as a preferred equity interest investment in an entity affiliated with MMC that owns an apartment development in Redwood City, California. In March 2015 the Company's preferred interest investment was prepaid and the Company recognized a gain of $0.5 million as a result of the prepayment.

In 2010, an Executive Vice President of the Company invested $4.0 million for a 3% limited partnership interest in a partnership with the Company that owns Essex Skyline at MacArthur Place. The Executive Vice President’s investment is equal to a pro-rata share of the contributions to the limited partnership. The Executive Vice President’s investment also receives pro-rata distributions resulting from distributable cash generated by the property if and when distributions are made.

(6) Discontinued Operations

The Company determined that the disposals through the years ended December 31, 2015 and 2014 were not considered discontinued operations in accordance with ASU 2014-08. The gains related to these disposals are recorded in gains on sale of real estate and land in the consolidated statements of income.

During 2013, the Company sold Linden Square, a 183 unit community located in Seattle, Washington for $25.3 million, resulting in a gain of $12.7 million. Also during 2013, the Company sold Cambridge, a 40 unit property located in Chula Vista, California for $4.7 million, resulting in a gain of $2.5 million, and Brentwood, a 140 unit property located in Santa Ana, California for $27.5 million, resulting in a gain of $14.0 million.

The Company has recorded the gains on sales and operations for these various assets sold described above as part of discontinued operations in the accompanying consolidated statements of income.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets, as described above ($ in thousands):



	2013
Revenues	$	4,454
Property operating expenses	(1,406		)
Depreciation and amortization	(1,098		)
Expenses	(2,504		)
Operating income from real estate sold	1,950
Gain on sale of real estate	29,223
Income from discontinued operations	$	31,173

(7) Unsecured Debt

ESS does not have any indebtedness as all debt is incurred by the Operating Partnership. ESS guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities up to the maximum amounts and for the full term of the facilities.

Unsecured debt consists of the following as of December 31, 2015 and 2014 ($ in thousands):



	2015			2014			Weighted Average Maturity In Years
Unsecured bonds private placement - fixed rate	$	463,891		$	463,443		3.2
Term loan - variable rate	224,467			224,130			0.9
Bonds public offering - fixed rate	2,400,322			1,915,975			6.7
Unsecured debt, net (1)	3,088,680			2,603,548
Lines of credit, net (2)	11,707			242,824
Total unsecured debt	$	3,100,387		$	2,846,372
Weighted average interest rate on fixed rate unsecured and unsecured private placement bonds	3.6		%	3.6		%
Weighted average interest rate on variable rate term loan	2.4		%	2.4		%
Weighted average interest rate on lines of credit	1.9		%	1.8		%


(1)	Includes unamortized premium and discounts of $14.3 million and $27.5 million and reduced by unamortized debt issuance costs of $15.6 million and $13.9 million as of December 31, 2015 and 2014, respectively.


(2)	Includes unamortized debt issuance costs of $3.3 million and $3.6 million as of December 31, 2015 and 2014, respectively.

As of December 31, 2015 and 2014, the Company had $465.0 million of private placement unsecured bonds outstanding at an average effective interest rate of 4.5%.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The following is a summary of the Company’s unsecured private placement bonds as of December 31, 2015 and 2014 ($ in thousands):



	Maturity	2015		2014		Coupon Rate
Senior unsecured private placement notes	March 2016	$	150,000	$	150,000	4.36	%
Senior unsecured private placement notes	September 2017	40,000		40,000		4.50	%
Senior unsecured private placement notes	December 2019	75,000		75,000		4.92	%
Senior unsecured private placement notes	April 2021	100,000		100,000		4.27	%
Senior unsecured private placement notes	June 2021	50,000		50,000		4.30	%
Senior unsecured private placement notes	August 2021	50,000		50,000		4.37	%
		$	465,000	$	465,000

As of December 31, 2015 and 2014, the Company had unsecured term loans outstanding of $225.0 million at an average interest rate of 2.4%. These loans are included in the line “Term loan-variable rate” in the table above, and as of December 31, 2015 and 2014, the carrying value net of debt issuance costs was $224.5 million and $224.1 million, respectively. The term loans are at a variable interest rate of LIBOR plus 1.05%. The Company entered into interest rate swap contracts for a term of five years with a notional amount totaling $225.0 million, which effectively converted the interest rate on $225.0 million of the term loans to a fixed rate of 2.4%. The $200 million tranche of this unsecured term loan has a maturity date of November 2016 and the $25 million tranche has a maturity date of August 2017.

In March 2015, the Company issued $500.0 million of senior unsecured notes due on April 1, 2025 with a coupon rate of 3.5% per annum and are payable on April 1st and October 1st of each year, beginning October 1, 2015 (the 2025 Notes). The 2025 Notes were offered to investors at a price of 99.747% of par value. The 2025 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line “Bonds public offering-fixed rate” in the table above, and as of December 31, 2015, the carrying value of the 2025 Notes, net of discount and debt issuance costs was $494.8 million.

In April 2014, the Company assumed $900.0 million aggregate principal amount of BRE’s 5.500% senior notes due 2017; 5.200% senior notes due 2021; and 3.375% senior notes due 2023 (together “BRE Notes”). These notes are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2015 and 2014, the carrying value of the BRE Notes, plus unamortized premium was $919.1 million and $931.4 million, respectively.

In April 2014, the Company issued $400.0 million of senior unsecured notes due on May 1, 2024 with a coupon rate of 3.875% per annum and are payable on May 1st and November 1st of each year, beginning November 1, 2014 (the 2024 Notes). The 2024 Notes were offered to investors at a price of 99.234% of par value. The 2024 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2015 and 2014, the carrying value of the 2024 Notes, net of discount and debt issuance costs was $394.5 million and $393.8 million, respectively.

In April 2013, the Company issued $300.0 million of senior unsecured notes due on May 1, 2023 with a coupon rate of 3.25% per annum and are payable on May 1st and November 1st of each year, beginning November 1, 2013 (the 2023 Notes). The 2023 Notes were offered to investors at a price of 99.152% of par value. The 2023 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line “Bonds public offering-fixed rate” in the table above, and as of December 31, 2015 and 2014, the carrying value of the 2023 Notes, net of discount and debt issuance costs was $295.9 million and $295.5 million, respectively.

During the third quarter 2012, the Company issued $300.0 million of senior unsecured notes due August 2022 with a coupon rate of 3.625% per annum and are payable on February 15th and August 15th of each year, beginning February 15, 2013 (the 2022 Notes). The 2022 Notes were offered to investors at a price of 98.99% of par value. The 2022 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2015 and 2014, the carrying value of the 2022 Notes, net of unamortized discount and debt issuance costs was $296.0 million and $295.3 million, respectively.

The following is a summary of the Company’s senior unsecured notes as of December 31, 2015 and 2014 ($ in thousands):



	Maturity	2015	2014	Coupon Rate
Senior notes	March 2017	300,000	300,000	5.500	%
Senior notes	March 2021	300,000	300,000	5.200	%
Senior notes	August 2022	300,000	300,000	3.625	%
Senior notes	January 2023	300,000	300,000	3.375	%
Senior notes	May 2023	300,000	300,000	3.250	%
Senior notes	May 2024	400,000	400,000	3.875	%
Senior notes	April 2025	500,000	—	3.500	%
		2,400,000	1,900,000

The aggregate scheduled principal payments of unsecured debt payable, excluding lines of credit, at December 31, 2015 are as follows ($ in thousands):



2016	$	350,000
2017	365,000
2018	—
2019(1)	75,000
2020	—
Thereafter	2,300,000
	$	3,090,000


(1)	Amount does not include $15.0 million outstanding on the Company's lines of credit as of December 31, 2015, that becomes due in December 2019 in accordance with the January 2016 amendment.

The Company has two lines of credit aggregating $1.03 billion as of December 31, 2015. The Company has a $1 billion credit facility with an underlying interest rate based on a tiered rate structure tied to Fitch and S&P ratings on the credit facility and the rate was LIBOR plus 0.95% as of December 31, 2015. As of December 31, 2015 and 2014, the balance of the $1 billion credit facility was $15.0 million and $229.8 million, respectively. In January 2016, the facility maturity date was extended to December 31, 2019 with one 18-month extension, exercisable by the Company and the interest rate, which is based on a tiered rate structure tied to the Company's corporate ratings, was lowered to LIBOR plus 0.90%. The Company also has a working capital unsecured line of credit agreement for $25.0 million. The underlying interest rate on the $25.0 million line is based on a tiered rate structure tied to Fitch and S&P ratings on the credit facility of LIBOR plus 0.95%. As of December 31, 2015 and 2014, there was a zero and $16.6 million balance, respectively, outstanding on this unsecured line. In January 2016, the maturity date was extended to January 2018 and the interest rate, which is based on a tiered rate structure tied to the Company's corporate ratings, was lowered to LIBOR plus 0.90%.

The Company’s unsecured line of credit and unsecured debt agreements contain debt covenants related to limitations on indebtedness and liabilities, and maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization. The Company was in compliance with the debt covenants as of December 31, 2015 and 2014.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

(8) Mortgage Notes Payable

ESS does not have any indebtedness as all debt is incurred by the Operating Partnership. Mortgage notes payable consist of the following as of December 31, 2015 and 2014 ($ in thousands):



	2015			2014
Fixed rate mortgage notes payable	$	1,925,985		$	2,049,577
Variable rate mortgage notes payable (1)	289,092			184,740
Total mortgage notes payable (2)	$	2,215,077		$	2,234,317
Number of properties securing mortgage notes	64			67
Remaining terms	1-31 years			1-26 years
Weighted average interest rate	4.4		%	4.6		%

The aggregate scheduled principal payments of mortgage notes payable at December 31, 2015 are as follows ($ in thousands):



2016	$	29,714
2017	199,180
2018	320,622
2019	586,212
2020	693,088
Thereafter	329,451
	$	2,158,267

(1)

Variable rate mortgage notes payable, including $257.3 million in bonds that have been converted to variable rate through total return swap contracts, consists of multi-family housing mortgage revenue bonds secured by deeds of trust on rental properties and guaranteed by collateral pledge agreements, payable monthly at a variable rate as defined in the Loan Agreement (approximately 1.2% at December 2015 and 1.8% at December 2014) plus credit enhancement and underwriting fees ranging from approximately 1.2% to 1.9%. Among the terms imposed on the properties, which are security for the bonds, is a requirement that 20% of the apartment homes are subject to tenant income criteria. Principal balances are due in full at various maturity dates from March 2019 through December 2046. Of these bonds $20.7 million are subject to various interest rate cap agreements which limit the maximum interest rate to such bonds.


(2)	Includes total unamortized premium of $64.8 million and $83.8 million and reduced by unamortized debt issuance costs of $8.0 million and $11.9 million as of December 31, 2015 and 2014, respectively.

For the Company’s mortgage notes payable as of December 31, 2015, monthly interest expense and principal amortization, excluding balloon payments, totaled approximately $7.5 million and $2.4 million, respectively. Second deeds of trust accounted for $48.5 million of the $2.2 billion in mortgage notes payable as of December 31, 2015. Repayment of debt before the scheduled maturity date could result in prepayment penalties. The prepayment penalty on the majority of the Company’s mortgage notes payable are computed by the greater of (a) 1% of the amount of the principal being prepaid or (b) the present value of the mortgage note payable which is calculated by multiplying the principal being prepaid by the difference between the interest rate of the mortgage note and the stated yield rate on a specified U.S. treasury security as defined in the mortgage note agreement.

(9) Derivative Instruments and Hedging Activities

The Company uses interest rate swaps and interest rate cap contracts to manage certain interest rate risks. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

The Company has entered into interest rate swap contracts with an aggregate notional amount of $225.0 million that effectively fixed the interest rate on the $225.0 million unsecured term loan at 2.4%. These derivatives qualify for hedge accounting.

As of December 31, 2015 the Company had interest rate caps, which are not accounted for as hedges, totaling a notional amount of $20.7 million that effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying variable interest rate for $20.7 million of the Company’s tax exempt variable rate debt.

As of December 31, 2015 and 2014, the aggregate carrying value of the interest rate swap contracts was a liability of $1.0 million and $1.8 million, respectively, and is included in other liabilities on the consolidated balance sheets. The aggregate carrying value of the interest rate cap was zero on the balance sheet as of December 31, 2015 and December 31, 2014.

Hedge ineffectiveness related to cash flow hedges, which is reported in current year income as interest expense, net was not significant for the years ended December 31, 2015, 2014 and 2013.

Additionally, the Company has entered into four total return swaps, that effectively convert $257.3 million of mortgage notes payable to a floating interest rate based on SIFMA plus a spread. The total return swaps provide fair market value protection on the mortgage notes payable to our counterparties during the initial period of the total return swap until the Company's option to call the mortgage notes at par can be exercised. The Company can currently call one of the total return swaps with $114.4 million of the outstanding debt at par, while the call option on the other three total return swaps relating to $142.9 million of the outstanding debt can be exercised starting on January 1, 2017. These derivatives do not qualify for hedge accounting and had a carrying and fair value of $4 thousand at December 31, 2015. These total return swaps are scheduled to mature between September 2021 and November 2022. The Company held no total return swaps at December 31, 2014. The realized gains of $5.7 million were reported in current year income as total return swap income. No such income or expense was incurred for the years ended December 31, 2014 and 2013.

(10) Lease Agreements

As of December 31, 2015 the Company is a lessor for three commercial buildings and the commercial portions of 33 mixed use communities. The tenants’ lease terms expire at various times through 2031. The future minimum non-cancelable base rent to be received under these operating leases for each of the years ending after December 31 is summarized as follows ($ in thousands):



	Future
	Minimum
	Rent
2016	$	11,067
2017	10,078
2018	9,211
2019	8,467
2020	7,690
Thereafter	24,955
	$	71,468

(11) Equity Transactions

Preferred Securities Offerings

During the second quarter of 2011, the Company issued 2,950,000 shares of 7.125% Series H Cumulative Redeemable Preferred Stock (“Series H”) at a price of $25.00 per share for net proceeds of $71.2 million, net of costs and original issuance discounts. The Series H has no maturity date and generally may not be called by the Company before April 13, 2016. Net

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

proceeds from the Series H offering were contributed to the Operating Partnership for a 7.125% Series H Cumulative Redeemable Preferred Interest. As of December 31, 2015 and 2014, there were 8,000,000 shares authorized and 2,950,000 shares outstanding of Series H with an aggregate liquidation value of $73.8 million.

Common Stock Offerings

During 2015, the Company issued 1,481,737 shares of common stock, through our equity distribution program, at an average price of $226.46 for net proceeds of $332.3 million.

In April 2014, Essex issued approximately 23,067,446 shares of Essex common stock as Stock Consideration in the BRE merger at an average price of $163.82.

During 2014, Essex sold 2,964,315 shares of common stock for proceeds of $534.0 million, net of fees and commissions, at an average price of $181.56.

Operating Partnership Units and Long Term Incentive Plan (“LTIP”) Units

As of December 31, 2015 and 2014, the Operating Partnership had outstanding 2,070,360 and 2,076,810 operating partnership units and 144,185 and 91,348 vested LTIP units, respectively. The Operating Partnership’s general partner, ESS, owned 96.7% of the partnership interests in the Operating Partnership at both December 31, 2015 and 2014, and ESS is responsible for the management of the Operating Partnership’s business. As the general partner of the Operating Partnership, ESS effectively controls the ability to issue common stock of ESS upon a limited partner’s notice of redemption. ESS has generally acquired OP units upon a limited partner’s notice of redemption in exchange for shares of its common stock. The redemption provisions of OP units owned by limited partners that permit ESS to settle in either cash or common stock at the option of ESS were further evaluated in accordance with applicable accounting guidance to determine whether temporary or permanent equity classification on the balance sheet is appropriate. The Operating Partnership evaluated this guidance, including the requirement to settle in unregistered shares, and determined that, with few exceptions, these OP units meet the requirements to qualify for presentation as permanent equity.

LTIP units represent an interest in the Operating Partnership for services rendered or to be rendered by the LTIP unit holder in its capacity as a partner, or in anticipation of becoming a partner, in the Operating Partnership. Upon the occurrence of specified events, LTIP units may over time achieve full parity with common units of the Operating Partnership for all purposes. Upon achieving full parity, LTIP units will be exchanged for an equal number of the OP Units.

The redemption value of OP and LTIP units owned by the limited partners, not including ESS, had such units been redeemed at December 31, 2015, was approximately $530.2 million based on the closing price of ESS’s common stock as of December 31, 2015.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

(12) Net Income Per Common Share and Net Income Per Common Unit

Essex Property Trust, Inc.

Basic and diluted income from continuing and discontinued operations per share is calculated as follows for the years ended December 31 ($ in thousands, except share and per share amounts):



	2015					2014					2013
	Income		Weighted- average Common Shares	Per Common Share Amount		Income		Weighted- average Common Shares	Per Common Share Amount		Income		Weighted- average Common Shares	Per Common Share Amount
Basic:
Income from continuing operations available to common stockholders	$	226,865	64,871,717	$	3.50	$	116,859	56,546,959	$	2.07	$	121,324	37,248,960	$	3.26
Income from discontinued operations available to common stockholders	—		64,871,717	—		—		56,546,959	—		29,487		37,248,960	0.79
	$	226,865		$	3.50	$	116,859		$	2.07	$	150,811		$	4.05
Effect of Dilutive Securities (1)	—		189,968			—		149,566			—		86,335
Diluted:
Income from continuing operations available to common stockholders (1)	$	226,865	65,061,685	$	3.49	$	116,859	56,696,525	$	2.06	$	121,324	37,335,295	$	3.25
Income from discontinued operations available to common stockholders	—		65,061,685	—		—		56,696,525	—		29,487		37,335,295	0.79
	$	226,865		$	3.49	$	116,859		$	2.06	$	150,811		$	4.04

(1)

Weighted average convertible limited partnership units of 2,182,467, 2,224,707, and 2,131,425, which include vested Series Z Incentive Units, Series Z-1 Incentive Units, 2014 Long-Term Incentive Plan Units, and 2015 Long-Term Incentive Plan Units, for the years ended December 31, 2015, 2014 and 2013, respectively, were not included in the determination of diluted earnings per share calculation because they were anti-dilutive. Additionally, excludes 963,172 DownREIT units as they are anti-dilutive.

Stock options of 54,100, 10,843, and 168,325, for the years ended December 31, 2015, 2014, and 2013, respectively, were not included in the diluted earnings per share calculation because the assumed proceeds per share of these options plus the average unearned compensation were greater than the average market price of the common stock for the years ended and, therefore, were anti-dilutive.

All shares of cumulative convertible Series H preferred interest have been excluded from diluted earnings per unit for the years ended 2015, 2014, and 2013 respectively, as the effect was anti-dilutive. All shares of cumulative convertible Series G preferred interest have been excluded from diluted earnings per unit for the years ended 2014 and 2013 respectively, as the effect was anti-dilutive.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

Essex Portfolio, L.P.

Basic and diluted income from continuing and discontinued operations per unit is calculated as follows for the years ended December 31 ($ in thousands, except unit and per unit amounts):



	2015					2014					2013
	Income		Weighted- average Common Units	Per Common Unit Amount		Income		Weighted- average Common Units	Per Common Unit Amount		Income		Weighted- average Common Units	Per Common Unit Amount
Basic:
Income from continuing operations available to common unitholders	$	234,689	67,054,184	$	3.50	$	121,726	58,771,666	$	2.07	$	128,576	39,380,385	$	3.27
Income from discontinued operations	—		67,054,184	—		—		58,771,666	—		31,173		39,380,385	0.79
Income available to common unitholders	$	234,689		$	3.50	$	121,726		$	2.07	$	159,749		$	4.06
Effect of Dilutive Securities (1)	—		189,968			—		149,566			—		86,335
Diluted:
Income from continuing operations available to common unitholders (1)	$	234,689	67,244,152	$	3.49	$	121,726	58,921,232	$	2.07	$	128,576	39,466,720	$	3.26
Income from discontinued operations	—		67,244,152	—		—		58,921,232	—		31,173		39,466,720	0.79
Income available to common unitholders	$	234,689		$	3.49	$	121,726		$	2.07	$	159,749		$	4.05

(1)

Stock options of 54,100, 10,843, and 168,325, for the years ended December 31, 2015, 2014, and 2013, respectively, were not included in the diluted earnings per unit calculation because the assumed proceeds per share of these options plus the average unearned compensation were greater than the average market price of the common shares for the years ended and, therefore, were anti-dilutive. Additionally, excludes 963,172 DownREIT units as they are anti-dilutive.

The cumulative convertible Series H preferred interest have been excluded from diluted earnings per unit for the years ended 2015, 2014, and 2013 respectively, as the effect was anti-dilutive. The cumulative convertible Series G preferred interest have been excluded from diluted earnings per unit for the years ended 2014 and 2013 respectively, as the effect was anti-dilutive.

(13) Equity Based Compensation Plans

Stock Options and Restricted Stock

In May 2013, stockholders approved the Company’s 2013 Stock Award and Incentive Compensation Plan (“2013 Plan”). The 2013 Plan became effective on June 1, 2013 and serves as the successor to the Company’s 2004 Stock Incentive Plan (the “2004 Plan”), and no additional equity awards can be granted under the 2004 Plan after the date the 2013 Plan became effective.

The Company’s 2013 Plan provides incentives to attract and retain officers, directors and key employees. The 2013 Plan provides for the grants of options to purchase shares of common stock, grants of restricted stock and other award types. Under the 2013 Plan, the maximum aggregate number of shares that may be issued is 1,000,000, plus any shares that have not been issued under the 2004 Plan, including shares subject to outstanding awards under the 2004 Plan that are not issued or delivered to a participant for any reason. The 2013 Plan is administered by the Compensation Committee of the Board of Directors, which is comprised of independent directors. The Compensation Committee is authorized to establish the exercise price;

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

however, the exercise price cannot be less than 100% of the fair market value of the common stock on the grant date. The Company’s options have a life of five to ten years. Option grants for officers and employees fully vest between 0 and 5 years after the grant date.

Stock-based compensation expense for options and restricted stock under the fair value method totaled $6.1 million, $6.1 million, and $2.3 million for years ended December 31, 2015, 2014 and 2013 respectively. Stock-based compensation expense for options and restricted stock for the year ended December 31, 2015 and 2014, includes $0.2 million and $3.6 million related to the BRE merger, of which $0.1 million and $1.7 million relates to merger and integration expenses, and which is recorded in merger and integration expense in the consolidated statements of income, respectively. In the fourth quarter of 2015, stock-based compensation expense included $2.7 million related to an immediate vesting of options and restricted stock for bonuses awarded based on asset dispositions, which is recorded as a cost of real estate and land sold. Stock-based compensation for options and restricted stock related to recipients who are direct and incremental to projects under development were capitalized and totaled $0.3 million, $0.4 million, and $0.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. The intrinsic value of the options exercised totaled $19.4 million, $12.7 million, and $3.0 million, for the years ended December 31, 2015, 2014, and 2013 respectively. The intrinsic value of the options exercisable totaled $29.8 million, as of December 31, 2015.

Total unrecognized compensation cost related to unvested stock options totaled $3.4 million as of December 31, 2015 and the unrecognized compensation cost is expected to be recognized over a period of 0 to 5 years.

The average fair value of stock options granted for the years ended December 31, 2015, 2014 and 2013 was $22.78, $20.56 and $15.80, respectively. Certain stock options granted in 2015, 2014, and 2013 included a $75 cap, a $100 cap or a $125 cap on the appreciation of the market price over the exercise price. The fair value of stock options was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants:



	2015			2014			2013
Stock price	$	227.75		$	176.65		$	153.54
Risk-free interest rates	1.83		%	2.37		%	2.68		%
Expected lives	6 years			8 years			8 years
Volatility	20.06		%	18.00		%	18.03		%
Dividend yield	2.73		%	2.90		%	3.15		%

A summary of the status of the Company’s stock option plans as of December 31, 2015, 2014, and 2013 and changes during the years ended on those dates is presented below:



	2015				2014				2013
	Shares		Weighted- average exercise price		Shares		Weighted- average exercise price		Shares		Weighted- average exercise price
Outstanding at beginning of year	664,785		$	138.78	695,488		$	133.37	623,434		$	125.96
Granted	78,600		227.75		42,518		176.65		150,325		153.54
Granted - BRE options converted	—		—		133,766		121.03		—		—
Exercised	(203,556	)	131.53		(185,387	)	113.72		(52,970	)	102.43
Forfeited and canceled	(14,735	)	136.11		(21,600	)	144.29		(25,301	)	135.25
Outstanding at end of year	525,094		154.98		664,785		138.78		695,488		133.37
Options exercisable at year end	342,048		152.42		395,986		133.99		300,632		119.09

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The following table summarizes information about stock options outstanding as of December 31, 2015:



	Options outstanding				Options exercisable
	Number outstanding as of	Weighted- average remaining	Weighted- average		Number exercisable as of	Weighted- average
Range of	December 31,	contractual	exercise		December 31,	exercise
exercise prices	2015	life (years)	price		2015	price
$66.05 - $101.01	15,901	3.2	$	74.47	15,901	$	74.47
$105.64 - $161.98	367,024	5.3	139.73		218,041	135.00
$164.76 - $229.43	142,169	7.5	203.37		108,106	199.02
	525,094	5.8	154.98		342,048	152.42

The following table summarizes information about restricted stock outstanding as of December 31, 2015, 2014 and 2013 and changes during the years ended:



	2015				2014				2013
	Shares		Weighted- average grant price		Shares		Weighted- average grant price		Shares		Weighted- average grant price
Unvested at beginning of year	25,820		$	168.22	16,176		$	108.06	24,922		$	104.52
Granted	56,177		155.21		22,014		194.03		1,556		158.75
Granted - BRE restricted stock converted	—		—		119,411		173.82		—		—
Vested	(22,939	)	148.20		(126,931	)	171.56		(7,211	)	109.86
Forfeited and canceled	(4,382	)	122.06		(4,850	)	135.10		(3,091	)	100.84
Unvested at end of year	54,676		147.10		25,820		168.22		16,176		108.06

The unrecognized compensation cost related to unvested restricted stock totaled $7.7 million as of December 31, 2015 and is expected to be recognized over a period of 0 to 4 years.

Long Term Incentive Plans – LTIP Units

On December 9, 2014, the Operating Partnership issued 44,750 units under the 2015 Long-Term Incentive Plan Award agreements to executives of the Company. The 2015 Long-Term Incentive Plan Units (the “2015 LTIP Units”) are subject to forfeiture based on performance-based and service based conditions. An additional 24,000 units were granted subject only to performance-based criteria and were fully vested on the date granted. The 2015 LTIP Units, that were subject to vesting, will vest at 20% per year on each of the first five anniversaries of the initial grant date. The 2015 LTIP Units performance conditions measurement ended on December 9, 2015 and 95.75% of the units awarded were earned by the recipients. 2015 LTIP Units not earned based on the performance-based criteria were automatically forfeited by the recipients. The 2015 LTIP Units, once earned and vested, are convertible one-for-one into common units of the Operating Partnership which, in turn, are convertible into common stock of the Company subject to a ten-year liquidity restriction.

In December 2013, the Operating Partnership issued 50,500 units under the 2014 Long-Term Incentive Plan Award agreements to executives of the Company. The 2014 Long-Term Incentive Plan Units (the “2014 LTIP Units”) were subject to forfeiture based on performance-based conditions and are currently subject to service based vesting. The 2014 LTIP Units vest 25% per year on each of the first four anniversaries of the initial grant date. In December 2014, the Company achieved the performance criteria and all of the 2014 LTIP Units awarded were earned by the recipients, subject to satisfaction of service based vesting conditions. The 2014 LTIP Units are convertible one-for-one into common units of the Operating Partnership which, in turn, are convertible into common stock of the Company subject to a ten year liquidity restriction.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The estimated fair value of the 2015 LTIP Units and 2014 LTIP Units were determined on the grant date using Monte Carlo simulations under a risk-neutral premise and considered Essex’s stock price on the date of grant, the unpaid dividends on unvested units and the discount factor for 10 years of illiquidity.

Prior to 2013, the Company issued Series Z Incentive Units and Series Z-1 Incentive Units (collectively referred to as “Z Units”) of limited partnership interest in the Operating Partnership. Vesting in the Z Units is based on performance criteria established in the plan. The criteria can be revised by the Board's Compensation Committee if the Committee deems that the plan's criterion is unachievable for any given year. The sale of Z Units is contractually prohibited. Z Units are convertible into Operating Partnership units which are exchangeable for shares of the Company’s common stock that have marketability restrictions. The estimated fair value of Z Units were determined on the grant date and considered the Company's stock price on the date of grant, the dividends that are not paid on unvested units and a marketability discount for the 8 to 15 years of illiquidity. Compensation expense is calculated by multiplying estimated vesting increases for the period by the estimated fair value as of the grant date.

During 2011 and 2010, the Operating Partnership issued 154,500 Series Z-1 Incentive Units (the “Z-1 Units”) of limited partner interest to executives of the Company. The Z-1 Units are convertible one-for-one into common units of the Operating Partnership (which, in turn, are convertible into common stock of the Company) upon the earlier to occur of 100 percent vesting of the units or the year 2026. The conversion ratchet (accounted for as vesting) of the Z-1 Units into common units, is to increase consistent with the Company’s annual FFO growth, but is not to be less than zero or greater than 14 percent. Z-1 Unit holders are entitled to receive distributions, on vested units, that are now equal to dividends distributed to common stockholders.

Stock-based compensation expense for LTIP and Z Units under the fair value method totaled approximately $3.5 million, $6.0 million and $2.2 million for the years ended December 31, 2015, 2014 and 2013, respectively. Stock-based compensation expense for the year ended December 31, 2014 includes $1.7 million related to merger and integration expenses and is recorded in merger and integration expense in the consolidated statements of income. No such amounts were recorded in merger and integration expense in 2015. In the fourth quarter of 2014, stock-based compensation expense included $2.4 million related to an immediate vesting of certain of the 2015 LTIP Units. No such amounts were recorded in 2015. Stock-based compensation related to LTIP Units attributable to recipients who are direct and incremental to these projects was capitalized to real estate under development and totaled approximately $0.5 million, $0.4 million, and $0.5 million, for the years ended December 31, 2015, 2014, and 2013, respectively. The intrinsic value of the vested and unvested LTIP Units totaled $59.9 million as of December 31, 2015. Total unrecognized compensation cost related to the unvested LTIP Units under the LTIP Units plans totaled $6.0 million as of December 31, 2015. On a weighted average basis, the unamortized cost for the 2014 and 2015 LTIP Units and the Z Units is expected to be recognized over the next 3.2 years and 9.5 years, respectively.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The following table summarizes information about the LTIP Units outstanding as of December 31, 2015 ($ in thousands):



	Long Term Incentive Plan - LTIP Units
	Total Vested Units		Total Unvested Units		Total Outstanding Units		Weighted- average Grant-date Fair Value		Weighted- average Remaining Contractual Life (years)
Balance, December 31, 2012	190,704		140,043		330,747		$	58.44	11.3
Granted	—		50,500		50,500
Vested	35,919		(35,919	)	—
Converted	(108,433	)	—		(108,433	)
Cancelled	—		(5,243	)	(5,243	)
Balance, December 31, 2013	118,190		149,381		267,571		63.53		9.3
Granted	24,000		44,750		68,750
Vested	41,729		(41,729	)	—
Converted	(2,000	)	—		(2,000	)
Cancelled	—		(1,335	)	(1,335	)
Balance, December 31, 2014	181,919		151,067		332,986		71.14		10.5
Granted	—		—		—
Vested	36,650		(36,650	)	—
Converted	(74,384	)	—		(74,384	)
Cancelled	—		(8,260	)	(8,260	)
Balance, December 31, 2015	144,185		106,157		250,342		$	75.41	9.5

(14) Segment Information

The Company's segment disclosures present the measure used by the chief operating decision makers for purposes of assessing each segment's performance. Essex's chief operating decision makers are comprised of several members of its executive management team who use NOI to assess the performance of the business for the Company's reportable operating segments. NOI represents total property revenue less direct property operating expenses.

The executive management team evaluates the Company's operating performance geographically. The Company defines its reportable operating segments as the three geographical regions in which its communities are located: Southern California, Northern California and Seattle Metro.

Excluded from segment revenues and net operating income are communities classified in discontinued operations, management and other fees from affiliates, and interest and other income. Non-segment revenues and net operating income included in the following schedule also consist of revenue generated from commercial properties. Other non-segment assets include real estate under development, co-investments, cash and cash equivalents, marketable securities, notes and other receivables and prepaid expenses and other assets.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

The revenues and net operating income for each of the reportable operating segments are summarized as follows for the years ended December 31, 2015, 2014, and 2013 ($ in thousands):



	Years Ended December 31,
	2015			2014			2013
Revenues:
Southern California	$	529,440		$	423,570		$	263,582
Northern California	416,347			326,996			210,831
Seattle Metro	201,418			168,337			107,796
Other real estate assets	38,293			42,688			21,118
Total property revenues	$	1,185,498		$	961,591		$	603,327
Net operating income:
Southern California	$	355,007		$	279,434		$	176,075
Northern California	297,472			228,971			146,053
Seattle Metro	136,580			112,494			71,650
Other real estate assets	32,931			28,146			12,213
Total net operating income	821,990			649,045			405,991
Depreciation and amortization	(453,423		)	(360,592		)	(192,420		)
Interest expense	(204,827		)	(164,551		)	(116,524		)
Total return swap income	5,655			—			—
Management and other fees from affiliates	8,909			9,347			7,263
General and administrative	(40,090		)	(40,878		)	(26,684		)
Merger and integration expenses	(3,798		)	(53,530		)	(4,284		)
Acquisition and investment related costs	(2,414		)	(1,878		)	(1,161		)
Interest and other income	19,143			11,811			11,633
Loss on early retirement of debt, net	(6,114		)	(268		)	(300		)
Gain on sale of real estate and land	47,333			46,039			1,503
Equity income from co-investments	21,861			39,893			55,865
Gain on remeasurement of co-investment	34,014			—			—
Income before discontinued operations	$	248,239		$	134,438		$	140,882

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

Total assets for each of the reportable operating segments are summarized as follows as of December 31, 2015 and 2014 ($ in thousands):



	As of December 31,
Assets:	2015		2014
Southern California	$	4,912,264	$	4,277,754
Northern California	3,749,072		3,418,571
Seattle Metro	1,613,175		1,647,058
Other real estate assets	107,066		336,492
Net reportable operating segments - real estate assets	10,381,577		9,679,875
Real estate under development	242,326		429,096
Co-investments	1,036,047		1,042,423
Real estate held for sale, net	26,879		56,300
Cash and cash equivalents, including restricted cash	123,055		95,749
Marketable securities and other investments	137,485		117,240
Notes and other receivables	19,285		24,923
Other non-segment assets	38,437		81,126
Total assets	$	12,005,091	$	11,526,732

(15) 401(k) Plan

The Company has a 401(k) benefit plan (the “Plan”) for all eligible employees. Employee contributions are limited by the maximum allowed under Section 401(k) of the Internal Revenue Code. The Company matches 50% of the employee contributions up to a specified maximum. Company contributions to the Plan were approximately $1.6 million, $0.9 million, and $0.7 million for the years ended December 31, 2015, 2014, and 2013, respectively.

(16) Commitments and Contingencies

As of December 31, 2015, the Company had seven non-cancelable ground leases for certain apartment communities and buildings that expire between 2027 and 2082. Ground lease payments are typically the greater of a stated minimum or a percentage of gross rents generated by these apartment communities. Total minimum lease commitments, under ground leases and operating leases, are approximately $2.7 million per year for the next five years and $131.9 million thereafter.

To the extent that an environmental matter arises or is identified in the future that has other than a remote risk of having a material impact on the financial statements, the Company will disclose the estimated range of possible outcomes associated with it and, if an outcome is probable, accrue an appropriate liability for that matter. The Company will consider whether any such matter results in an impairment of value on the affected property and, if so, impairment will be recognized.

The Company has no way of determining at this time the magnitude of any potential liability to which it may be subject arising out of unknown environmental conditions with respect to the communities currently or formerly owned by the Company. No assurance can be given that: existing environmental assessments conducted with respect to any of these communities have revealed all environmental conditions or potential liabilities associated with such conditions; any prior owner or operator of a property did not create any material environmental condition not known to the Company; or a material environmental condition does not otherwise exist as to any one or more of the communities. The Company has limited insurance coverage for some of the types of environmental conditions and associated liabilities described above.

The Company has entered into transactions that may require the Company to pay the tax liabilities of the partners in the Operating Partnership or in the DownREIT entities. These transactions are within the Company’s control. Although the Company plans to hold the contributed assets or defer recognition of gain on their sale pursuant to like-kind exchange rules under Section 1031 of the Internal Revenue Code, the Company can provide no assurance that it will be able to do so and if such tax liabilities were incurred they may have a material impact on the Company’s financial position.

F- 48

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

There have been an increasing number of lawsuits against owners and managers of apartment communities alleging personal injury and property damage caused by the presence of mold in the residential units and common areas of those communities. Some of these lawsuits have resulted in substantial monetary judgments or settlements. The Company has been sued for mold related matters and has settled some, but not all, such suits. Insurance carriers have reacted to the increase in mold related liability awards by excluding mold related claims from standard general liability policies and pricing mold endorsements at prohibitively high rates. The Company has, however, purchased pollution liability insurance which includes some coverage for mold claims. The Company has also adopted policies intended to promptly address and resolve reports of mold and to minimize any impact mold might have on residents of its properties. The Company believes its mold policies and proactive response to address reported mold exposures reduces its risk of loss from mold claims. While no assurances can be given that the Company has identified and responded to all mold occurrences, the Company promptly addresses and responds to all known mold reports. Liabilities resulting from such mold related matters are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows. As of December 31, 2015, potential liabilities for mold and other environmental liabilities are not quantifiable and an estimate of possible loss cannot be made.

The Company carries comprehensive liability, fire, extended coverage and rental loss insurance for each of the communities. There are, however, certain types of extraordinary losses, such as, for example, losses from terrorism or earthquakes, for which the Company has limited insurance coverage. Substantially all of the communities are located in areas that are subject to earthquake activity. The Company has established a wholly-owned insurance subsidiary, Pacific Western Insurance LLC (“PWI”). Through PWI, the Company is self-insured as it relates to earthquake related losses. Additionally, since January 2008, PWI has provided property and casualty insurance coverage for the first $5.0 million of the Company’s property level insurance claims per incident. As of December 31, 2015, PWI has cash and marketable securities of approximately $60.3 million. These assets are consolidated in the Company’s financial statements. Beginning in 2013, the Company has obtained limited third party seismic insurance on selected assets in the Company's co-investments.

On December 19, 2014, a putative class action was filed against the Company in the U.S. District Court for the Northern

District of California, entitled Foster v. Essex Property Trust, Inc. alleging that the Company failed to properly secure the

personally-identifying information of its residents. The lawsuit seeks the recovery of unspecified damages and certain

injunctive relief. This lawsuit was filed in connection with a cyber-intrusion that the Company discovered in the third quarter of

At this point, the Company is unable to predict the developments in, outcome of, and/or economic and/or other

consequences of this litigation or predict the developments in, outcome of, and/or other consequences arising out of any

potential future litigation or government inquiries related to this matter.

The Company is subject to various other legal and/or regulatory proceedings arising in the course of its business operations. We believe that, with respect to such matters that we are currently a party to, the ultimate disposition of any such matter will not result in a material adverse effect on the Company’s financial condition, results of operations or cash flows.

(17) Subsequent Events

In January 2016, the Company acquired Mio, a 103 unit apartment community, located in San Jose, CA for $51.3 million,

In January 2016, a Company co-investment, BEXAEW, LLC, sold The Heights, a 332 unit apartment community, located in Chino Hills, CA for total proceeds of $93.8 million, of which $50.3 million was used to repay the loan on the property. The Company has a 50% ownership interest in the BEXAEW, LLC joint venture.

In January 2016, the Company sold its former headquarters office building located in Palo Alto, CA for total proceeds of $18.0 million.

In January 2016, the Company paid off $150.0 million in private placement unsecured bonds that had an interest rate of 4.36%.

In February 2016, the Company sold Harvest Park, a 104 unit community located in Santa Rosa, CA for $30.5 million.

F- 49

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

(18) Quarterly Results of Operations (Unaudited)

Essex Property Trust, Inc.

The following is a summary of quarterly results of operations for 2015 and 2014 ($ in thousands, except per share and dividend amounts):



	Quarter ended December 31		Quarter ended September 30		Quarter ended June 30		Quarter ended March 31
2015:
Total property revenues	$	308,646	$	302,522	$	294,101	$	280,229
Net income	$	85,762	$	47,182	$	50,542	$	64,753
Net income available to common stockholders	$	79,624	$	42,323	$	45,555	$	59,363
Per share data:
Net income:
Basic (1)	$	1.22	$	0.65	$	0.70	$	0.92
Diluted (1)	$	1.22	$	0.65	$	0.70	$	0.92
Market price:
High	$	244.71	$	232.20	$	231.90	$	243.17
Low	$	214.29	$	205.72	$	208.85	$	207.26
Close	$	239.41	$	223.42	$	212.50	$	229.90
Dividends declared	$	1.44	$	1.44	$	1.44	$	1.44
2014 (2):
Total property revenues	$	276,778	$	268,512	$	256,952	$	159,349
Net income	$	44,805	$	58,582	$	4,645	$	26,406
Net income available to common stockholders	$	40,175	$	53,565	$	1,207	$	21,912
Per share data:
Net income:
Basic (1)	$	0.63	$	0.85	$	0.02	$	0.58
Diluted (1)	$	0.63	$	0.85	$	0.02	$	0.58
Market price:
High	$	214.43	$	196.08	$	185.99	$	173.01
Low	$	176.70	$	177.68	$	164.76	$	141.79
Close	$	206.60	$	178.75	$	184.91	$	170.05
Dividends declared	$	1.30	$	1.30	$	1.30	$	1.21


(1)	Quarterly earnings per common unit amounts may not total to the annual amounts due to rounding and the changes in the number of weighted common units outstanding and included in the calculation of basic and diluted shares.


(2)	Includes BRE results of operations after the merger date, April 1, 2014.

F- 50

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015, 2014, and 2013

Essex Portfolio, L.P.

The following is a summary of quarterly results of operations for 2015 and 2014 ($ in thousands, except per unit and distribution amounts):



	Quarter ended December 31		Quarter ended September 30		Quarter ended June 30		Quarter ended March 31
2015:
Total property revenues	$	308,646	$	302,522	$	294,101	$	280,229
Net income	$	85,762	$	47,182	$	50,542	$	64,753
Net income available to common unitholders	$	82,333	$	43,794	$	47,088	$	61,474
Per unit data:
Net income:
Basic (1)	$	1.22	$	0.65	$	0.70	$	0.93
Diluted (1)	$	1.22	$	0.65	$	0.70	$	0.92
Distributions declared	$	1.44	$	1.44	$	1.44	$	1.44
2014 (2):
Total property revenues	$	276,778	$	268,512	$	256,952	$	159,349
Net income	$	44,805	$	58,582	$	4,645	$	26,406
Net income available to common unitholders	$	41,599	$	55,382	$	1,416	$	23,329
Per unit data:
Net income:
Basic (1)	$	0.63	$	0.85	$	0.02	$	0.58
Diluted (1)	$	0.63	$	0.85	$	0.02	$	0.58
Distributions declared	$	1.30	$	1.30	$	1.30	$	1.21


(1)	Quarterly earnings per common unit amounts may not total to the annual amounts due to rounding and the changes in the number of weighted common units outstanding and included in the calculation of basic and diluted shares.


(2)	Includes BRE results of operations after the merger date, April 1, 2014.

F- 51

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2015

(Dollars in thousands)



									Costs
					Initial cost				capitalized		Gross amount carried at close of period
	Apartment						Buildings and		subsequent to		Land and		Buildings and				Accumulated			Date of	Date	Lives
Property	Homes	Location	Encumbrance		Land		improvements		acquisition		improvements		improvements		Total (1)		depreciation			construction	acquired	(years)
Encumbered communities
Avondale at Warner Center	446	Woodland Hills, CA	$	44,470	$	10,536	$	24,522	$	18,315	$	10,601	$	42,772	$	53,373	$	(26,174	)	1970	Jan-97	3-30
Bel Air	462	San Ramon, CA	52,615		12,105		18,252		31,563		12,682		49,238		61,920		(26,928		)	1988	Jan-97	3-30
Belcarra	296	Bellevue, WA	54,416		21,725		92,091		253		21,725		92,344		114,069		(5,874		)	2009	Apr-14	5-30
Bella Villagio	231	San Jose, CA	34,686		17,247		40,343		2,271		17,247		42,614		59,861		(8,054		)	2004	Sep-10	3-30
BellCentre	248	Bellevue, WA	40,485		16,197		67,207		1,463		16,197		68,670		84,867		(4,461		)	2001	Apr-14	5-30
Belmont Station	275	Los Angeles, CA	29,604		8,100		66,666		5,034		8,267		71,533		79,800		(20,898		)	2009	Mar-09	3-30
Bridgeport	184	Newark, CA	20,559		1,608		7,582		8,801		1,525		16,466		17,991		(12,685		)	1987	Jul-87	3-30
Brookside Oaks	170	Sunnyvale, CA	18,897		7,301		16,310		23,258		10,328		36,541		46,869		(16,270		)	1973	Jun-00	3-30
Camino Ruiz Square	160	Camarillo, CA	21,093		6,871		26,119		1,431		6,931		27,490		34,421		(8,515		)	1990	Dec-06	3-30
Canyon Oaks	250	San Ramon, CA	27,553		19,088		44,473		2,543		19,088		47,016		66,104		(14,036		)	2005	May-07	3-30
Carmel Creek	348	San Diego, CA	65,204		26,842		107,368		2,474		26,842		109,842		136,684		(7,078		)	2000	Apr-14	5-30
City View	572	Hayward, CA	73,204		9,883		37,670		23,281		10,350		60,484		70,834		(38,459		)	1975	Mar-98	3-30
Courtyard off Main	110	Bellevue, WA	15,402		7,465		21,405		2,927		7,465		24,332		31,797		(4,663		)	2000	Oct-10	3-30
Domaine	92	Seattle, WA	15,149		9,059		27,177		710		9,059		27,887		36,946		(3,130		)	2009	Sep-12	3-30
Elevation	158	Redmond, WA	10,973		4,758		14,285		5,740		4,757		20,026		24,783		(5,319		)	1986	Jun-10	3-30
Ellington at Bellevue	220	Bellevue, WA	22,289		15,066		45,249		1,322		15,066		46,571		61,637		(2,109		)	1994	Jul-14	3-30
Fairhaven	164	Santa Ana, CA	20,230		2,626		10,485		6,040		2,957		16,194		19,151		(7,714		)	1970	Nov-01	3-30
Foster's Landing	490	Foster City, CA	100,847		61,714		144,000		5,685		61,714		149,685		211,399		(9,741		)	1987	Apr-14	5-30
Fountain at River Oaks	226	San Jose, CA	33,159		26,046		60,773		590		26,046		61,363		87,409		(3,953		)	1990	Apr-14	3-30
Fountain Park	705	Playa Vista, CA	82,366		25,073		94,980		29,371		25,203		124,221		149,424		(53,723		)	2002	Feb-04	3-30
Hampton Place/Hampton Court	215	Glendale, CA	20,213		6,695		16,753		13,193		6,733		29,908		36,641		(13,448		)	1970	Jun-99	3-30
Hidden Valley	324	Simi Valley, CA	29,262		14,174		34,065		2,620		9,674		41,185		50,859		(15,871		)	2004	Dec-04	3-30
Highlands at Wynhaven	333	Issaquah, WA	31,522		16,271		48,932		8,001		16,271		56,933		73,204		(15,525		)	2000	Aug-08	3-30
Highridge	255	Rancho Palos Verdes, CA	44,772		5,419		18,347		29,555		6,073		47,248		53,321		(26,591		)	1972	May-97	3-30
Hillcrest Park	608	Newbury Park, CA	65,566		15,318		40,601		17,368		15,755		57,532		73,287		(32,302		)	1973	Mar-98	3-30
Huntington Breakers	342	Huntington Beach, CA	36,648		9,306		22,720		17,026		9,315		39,737		49,052		(19,480		)	1984	Oct-97	3-30
Inglenook Court	224	Bothell, WA	8,174		3,467		7,881		6,686		3,474		14,560		18,034		(10,524		)	1985	Oct-94	3-30
Magnolia Square/Magnolia Lane (2)	188	Sunnyvale, CA	17,363		8,190		24,736		14,591		8,191		39,326		47,517		(13,145		)	1969	Sep-07	3-30
Mill Creek at Windermere	400	San Ramon, CA	47,344		29,551		69,032		3,447		29,551		72,479		102,030		(20,639		)	2005	Sep-07	3-30
Mirabella	188	Marina Del Rey, CA	43,518		6,180		26,673		14,103		6,270		40,686		46,956		(19,485		)	2000	May-00	3-30

F- 52

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2015

(Dollars in thousands)



						Costs
				Initial cost		capitalized	Gross amount carried at close of period
	Apartment				Buildings and	subsequent to	Land and	Buildings and		Accumulated		Date of	Date	Lives
Property	Homes	Location	Encumbrance	Land	improvements	acquisition	improvements	improvements	Total (1)	depreciation		construction	acquired	(years)
Montanosa	472	San Diego, CA	62,724	26,697	106,787	2,210	26,697	108,997	135,694	(7,005	)	1990	Apr-14	5-30
Montebello	248	Kirkland, WA	27,353	13,857	41,575	3,735	13,858	45,309	59,167	(5,903	)	1996	Jul-12	3-30
Montejo	124	Garden Grove, CA	15,232	1,925	7,685	2,822	2,194	10,238	12,432	(4,974	)	1974	Nov-01	3-30
Park Highland	250	Bellevue, WA	26,556	9,391	38,224	8,053	9,391	46,277	55,668	(2,743	)	1993	Apr-14	5-30
Park Hill at Issaquah	245	Issaquah, WA	27,802	7,284	21,937	5,979	7,284	27,916	35,200	(10,277	)	1999	Feb-99	3-30
Pathways	296	Long Beach, CA	36,325	4,083	16,757	19,274	6,239	33,875	40,114	(25,965	)	1975	Feb-91	3-30
Piedmont	396	Bellevue, WA	46,635	19,848	59,606	4,502	19,848	64,108	83,956	(3,638	)	1969	May-14	3-30
Pinnacle at Fullerton	192	Fullerton, CA	27,578	11,019	45,932	858	11,019	46,790	57,809	(2,980	)	2004	Apr-14	5-30
Pinnacle on Lake Washington	180	Renton, WA	18,724	7,760	31,041	449	7,760	31,490	39,250	(2,027	)	2001	Apr-14	5-30
Pinnacle at MacArthur Place	253	Santa Ana, CA	39,859	15,810	66,401	1,343	15,810	67,744	83,554	(4,306	)	2002	Apr-14	5-30
Pinnacle at Otay Ranch	364	San Diego, CA	40,970	17,023	68,093	766	17,023	68,859	85,882	(4,442	)	2001	Apr-14	5-30
Pinnacle at Talega	362	Irvine, CA	46,489	19,292	77,168	993	19,292	78,161	97,453	(5,014	)	2002	Apr-14	5-30
Stevenson Place	200	Fremont, CA	20,980	996	5,582	9,323	1,001	14,900	15,901	(10,244	)	1971	Apr-83	3-30
Summerhill Park	100	Sunnyvale, CA	13,032	2,654	4,918	9,769	2,656	14,685	17,341	(5,764	)	1988	Sep-88	3-30
The Audrey at Belltown	137	Seattle, WA	22,099	9,228	36,911	185	9,228	37,096	46,324	(2,373	)	1992	Apr-14	5-30
The Avery	121	Los Angeles, CA	9,985	6,964	29,922	16	6,964	29,938	36,902	(1,786	)	2014	Mar-14	3-30
The Barkley (3)	161	Anaheim, CA	15,951	—	8,520	5,561	2,353	11,728	14,081	(6,090	)	1984	Apr-00	3-30
The Bernard	63	Seattle, WA	9,141	3,699	11,345	231	3,689	11,586	15,275	(1,706	)	2008	Sep-11	3-30
The Carlyle	132	San Jose, CA	21,889	3,954	15,277	10,317	5,801	23,747	29,548	(11,968	)	2000	Apr-00	3-30
The Dylan	184	West Hollywood, CA	59,592	19,984	82,286	16	19,984	82,302	102,286	(2,637	)	2015	Mar-15	3-30
The Elliot at Mukilteo	301	Mukilteo, WA	10,628	2,498	10,595	14,940	2,824	25,209	28,033	(14,705	)	1981	Jan-97	3-30
The Huntington	276	Huntington Beach, CA	30,890	10,374	41,495	3,381	10,374	44,876	55,250	(5,765	)	1975	Jun-12	3-30
The Huxley	187	West Hollywood, CA	54,272	19,362	75,641	40	19,362	75,681	95,043	(2,486	)	2014	Mar-15	3-30
The Landing at Jack London Square	282	Oakland, CA	54,771	33,554	78,292	2,966	33,554	81,258	114,812	(5,336	)	2001	Apr-14	5-30
The Montclaire	390	Sunnyvale, CA	44,921	4,842	19,776	20,602	4,997	40,223	45,220	(33,694	)	1973	Dec-88	3-30
The Palms at Laguna Niguel	460	Laguna Niguel, CA	57,032	23,584	94,334	1,634	23,584	95,968	119,552	(6,171	)	1988	Apr-14	5-30
The Palisades	192	Bellevue, WA	20,138	1,560	6,242	11,658	1,565	17,895	19,460	(13,831	)	1977	May-90	3-30
The Waterford	238	San Jose, CA	30,689	11,808	24,500	13,536	15,165	34,679	49,844	(17,641	)	2000	Jun-00	3-30
Tierra Vista	404	Oxnard, CA	53,948	13,652	53,336	4,226	13,661	57,553	71,214	(23,033	)	2001	Jan-01	3-30
Valley Park	160	Fountain Valley, CA	25,856	3,361	13,420	5,269	3,761	18,289	22,050	(8,190	)	1969	Nov-01	3-30
Villa Angelina	256	Placentia, CA	31,908	4,498	17,962	6,539	4,962	24,037	28,999	(11,020	)	1970	Nov-01	3-30
Villa Grenada	270	Santa Clara, CA	61,057	38,299	89,365	326	38,299	89,691	127,990	(5,789	)	2010	Apr-14	5-30

F- 53

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2015

(Dollars in thousands)



									Costs
					Initial cost				capitalized		Gross amount carried at close of period
	Apartment						Buildings and		subsequent to		Land and		Buildings and				Accumulated			Date of	Date	Lives
Property	Homes	Location	Encumbrance		Land		improvements		acquisition		improvements		improvements		Total (1)		depreciation			construction	acquired	(years)
Wandering Creek	156	Kent, WA	5,209		1,285		4,980		3,790		1,296		8,759		10,055		(6,313		)	1986	Nov-95	3-30
Wilshire Promenade	149	Fullerton, CA	17,259		3,118		7,385		7,693		3,797		14,399		18,196		(8,305		)	1992	Jan-97	3-30
	17,085		$	2,215,077	$	797,144	$	2,589,987	$	482,664	$	810,649	$	3,059,146	$	3,869,795	$	(750,915	)

Unencumbered Communities
8th & Hope	290	Los Angeles, CA	$	—	$	29,279	$	169,350	$	441	$	29,279	$	169,791	$	199,070	$	(5,544	)	2014	Feb-15	3-30
Alessio	624	Los Angeles, CA	—		32,136		128,543		3,105		32,136		131,648		163,784		(8,564		)	2001	Apr-14	5-30
Allegro	97	Valley Village, CA	—		5,869		23,977		1,573		5,869		25,550		31,419		(6,656		)	2010	Oct-10	3-30
Allure at Scripps Ranch	194	San Diego, CA	—		11,923		47,690		280		11,923		47,970		59,893		(3,074		)	2002	Apr-14	5-30
Alpine Village	301	Alpine, CA	—		4,967		19,728		6,551		4,982		26,264		31,246		(11,485		)	1971	Dec-02	3-30
Anavia	250	Anaheim, CA	—		15,925		63,712		6,340		15,925		70,052		85,977		(11,955		)	2009	Dec-10	3-30
Annaliese	56	Seattle, WA	—		4,727		14,229		330		4,726		14,560		19,286		(1,452		)	2009	Jan-13	3-30
Apex	366	Milpitas, CA	—		44,240		103,251		1,104		44,240		104,355		148,595		(4,635		)	2014	Aug-14	3-30
Aqua at Marina Del Rey	500	Marina Del Ray, CA	—		58,442		175,326		4,965		58,442		180,291		238,733		(11,632		)	2001	Apr-14	5-30
Ascent	90	Kirkland, WA	—		3,924		11,862		1,669		3,924		13,531		17,455		(1,734		)	1988	Oct-12	3-30
Avant	440	Los Angeles, CA	—		32,379		137,940		261		32,379		138,201		170,580		(1,631		)	2014	Jun-15	3-30
Avenue 64	224	Emeryville, CA	—		27,235		64,403		8,486		27,235		72,889		100,124		(4,257		)	2007	Apr-14	5-30
Aviara (4)	166	Mercer Island, CA	—		—		49,813		136		—		49,949		49,949		(3,596		)	2013	Apr-14	5-30
Axis 2300	115	Irvine, CA	—		5,405		33,585		1,127		5,405		34,712		40,117		(8,800		)	2010	Aug-10	3-30
Bellerive	63	Los Angeles, CA	—		5,401		21,803		765		5,401		22,568		27,969		(4,455		)	2011	Aug-11	3-30
Belmont Terrace	71	Belmont, CA	—		4,446		10,290		4,399		4,473		14,662		19,135		(5,372		)	1974	Oct-06	3-30
Bennett Lofts	165	San Francisco, CA	—		21,771		50,800		25,515		28,371		69,715		98,086		(7,560		)	2004	Dec-12	3-30
Bernardo Crest	216	San Diego, CA	—		10,802		43,209		1,302		10,802		44,511		55,313		(2,837		)	1988	Apr-14	5-30
Bonita Cedars	120	Bonita, CA	—		2,496		9,913		2,187		2,503		12,093		14,596		(5,574		)	1983	Dec-02	3-30
Boulevard	172	Fremont, CA	—		3,520		8,182		10,888		3,580		19,010		22,590		(13,725		)	1978	Jan-96	3-30
Bridle Trails	108	Kirkland, WA	—		1,500		5,930		5,577		1,531		11,476		13,007		(7,107		)	1986	Oct-97	3-30
Brighton Ridge	264	Renton, WA	—		2,623		10,800		4,342		2,656		15,109		17,765		(9,599		)	1986	Dec-96	3-30
Bristol Commons	188	Sunnyvale, CA	—		5,278		11,853		6,978		5,293		18,816		24,109		(9,909		)	1989	Jan-97	3-30
416 on Broadway	115	Glendale, CA	—		8,557		34,235		1,905		8,557		36,140		44,697		(6,542		)	2009	Dec-10	3-30
Bunker Hill	456	Los Angeles, CA	—		11,498		27,871		43,175		11,639		70,905		82,544		(24,680		)	1968	Mar-98	3-30
Camarillo Oaks	564	Camarillo, CA	—		10,953		25,254		4,813		11,075		29,945		41,020		(19,180		)	1985	Jul-96	3-30
Cambridge Park	320	San Diego, CA	—		18,185		72,739		945		18,185		73,684		91,869		(4,770		)	1998	Apr-14	5-30

F- 54

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2015

(Dollars in thousands)



						Costs
				Initial cost		capitalized	Gross amount carried at close of period
	Apartment				Buildings and	subsequent to	Land and	Buildings and		Accumulated		Date of	Date	Lives
Property	Homes	Location	Encumbrance	Land	improvements	acquisition	improvements	improvements	Total (1)	depreciation		construction	acquired	(years)
Candlewood North	189	Northridge, CA	—	7,267	29,068	1,298	7,267	30,366	37,633	(1,954	)	1964	Apr-14	5-30
Canyon Pointe	250	Bothell, WA	—	4,692	18,288	6,156	4,693	24,443	29,136	(10,351	)	1990	Oct-03	3-30
Capri at Sunny Hills	100	Fullerton, CA	—	3,337	13,320	8,354	4,048	20,963	25,011	(10,424	)	1961	Sep-01	3-30
Carmel Landing	356	San Diego, CA	—	16,725	66,901	2,694	16,725	69,595	86,320	(4,478	)	1989	Apr-14	5-30
Carmel Summit	246	San Diego, CA	—	14,968	59,871	1,076	14,968	60,947	75,915	(3,887	)	1989	Apr-14	5-30
Castle Creek	216	Newcastle, WA	—	4,149	16,028	2,644	4,833	17,988	22,821	(11,526	)	1988	Dec-98	3-30
Catalina Gardens	128	Los Angeles, CA	—	6,714	26,856	503	6,714	27,359	34,073	(1,748	)	1987	Apr-14	5-30
CBC Apartments & The Sweeps	239	Goleta, CA	—	11,841	45,320	5,525	11,906	50,780	62,686	(19,106	)	1962	Jan-06	3-30
Cedar Terrace	180	Bellevue, WA	—	5,543	16,442	5,020	5,652	21,353	27,005	(8,662	)	1984	Jan-05	3-30
CentrePointe	224	San Diego, CA	—	3,405	7,743	19,503	3,442	27,209	30,651	(11,507	)	1974	Jun-97	3-30
Chestnut Street Apartments	96	Santa Cruz, CA	—	6,582	15,689	1,262	6,582	16,951	23,533	(4,527	)	2002	Jul-08	3-30
Collins on Pine	76	Seattle, WA	—	7,276	22,226	78	7,276	22,304	29,580	(1,215	)	2013	May-14	3-30
Corbella at Juanita Bay	169	Kirkland, WA	—	5,801	17,415	2,133	5,801	19,548	25,349	(3,663	)	1978	Nov-10	3-30
Cortesia at Rancho Santa Margarita	308	Rancho Santa Margarita, CA	—	13,912	55,649	719	13,912	56,368	70,280	(3,625	)	1999	Apr-14	5-30
Country Villas	180	Oceanside, CA	—	4,174	16,583	3,332	4,187	19,902	24,089	(9,274	)	1976	Dec-02	3-30
Deer Valley	171	San Rafael, CA	—	21,478	50,116	1,023	21,478	51,139	72,617	(3,329	)	1996	Apr-14	5-30
Delano/Bon Terra	126	Redmond, WA	—	7,470	22,511	978	7,470	23,489	30,959	(3,265	)	2005	Dec-11	3-30
Devonshire	276	Hemet, CA	—	3,470	13,786	3,236	3,482	17,010	20,492	(7,891	)	1988	Dec-02	3-30
Domain	379	San Diego, CA	—	23,848	95,394	799	23,848	96,193	120,041	(6,868	)	2013	Nov-13	3-30
Emerald Pointe	160	Diamond Bar, CA	—	8,458	33,832	813	8,458	34,645	43,103	(2,235	)	1989	Apr-14	5-30
Emerald Ridge	180	Bellevue, WA	—	3,449	7,801	3,500	3,449	11,301	14,750	(8,307	)	1987	Nov-94	3-30
Enso	183	San Jose, CA	—	21,397	71,135	2	21,397	71,137	92,534	(102	)	2014	Dec-15	3-30
Esplanade	278	San Jose, CA	—	18,170	40,086	9,874	18,429	49,701	68,130	(19,358	)	2002	Apr-11	3-30
Essex Skyline at MacArthur Place	349	Santa Ana, CA	—	21,537	146,099	2,862	21,537	148,961	170,498	(18,766	)	2008	Apr-12	3-30
Evergreen Heights	200	Kirkland, WA	—	3,566	13,395	4,566	3,649	17,878	21,527	(10,945	)	1990	Jun-97	3-30
Fairways (5)	74	Newport Beach, CA	—	—	7,850	6,731	9	14,572	14,581	(7,135	)	1972	Jun-99	3-30
Fairwood Pond	194	Renton, WA	—	5,296	15,564	2,490	5,297	18,053	23,350	(7,407	)	1997	Oct-04	3-30
Foothill Commons	394	Bellevue, WA	—	2,435	9,821	36,446	2,440	46,262	48,702	(30,270	)	1978	Mar-90	3-30
Foothill Gardens/Twin Creeks	176	San Ramon, CA	—	5,875	13,992	7,919	5,964	21,822	27,786	(12,293	)	1985	Feb-97	3-30
Forest View	192	Renton, WA	—	3,731	14,530	1,798	3,731	16,328	20,059	(6,991	)	1998	Oct-03	3-30
Fountain Court	320	Seattle, WA	—	6,702	27,306	10,209	6,585	37,632	44,217	(19,053	)	2000	Mar-00	3-30

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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2015

(Dollars in thousands)



						Costs
				Initial cost		capitalized		Gross amount carried at close of period
	Apartment				Buildings and	subsequent to		Land and	Buildings and		Accumulated		Date of	Date	Lives
Property	Homes	Location	Encumbrance	Land	improvements	acquisition		improvements	improvements	Total (1)	depreciation		construction	acquired	(years)
Fourth & U	171	Berkeley, CA	—	8,879	52,351	2,396		8,879	54,747	63,626	(11,966	)	2010	Apr-10	3-30
Fox Plaza	443	San Francisco, CA	—	39,731	92,706	12,668		39,731	105,374	145,105	(10,314	)	1968	Feb-13	3-30
Hillsborough Park	235	La Habra, CA	—	6,291	15,455	2,182		6,272	17,656	23,928	(9,602	)	1999	Sep-99	3-30
Hillsdale Garden	697	San Mateo, CA	—	22,000	94,681	20,672		22,000	115,353	137,353	(38,841	)	1948	Sep-06	3-30
Hope Ranch	108	Santa Barbara, CA	—	4,078	16,877	2,507		4,208	19,254	23,462	(5,586	)	1965	Mar-07	3-30
Jefferson at Hollywood	270	Los Angeles, CA	—	19,054	89,321	1,182		19,054	90,503	109,557	(5,745	)	2010	Apr-14	5-30
Joule	295	Seattle, WA	—	14,558	69,417	3,614		14,558	73,031	87,589	(16,387	)	2010	Mar-10	3-30
1000 Kiely	121	Santa Clara, CA	—	9,359	21,845	6,725		9,359	28,570	37,929	(5,605	)	1971	Mar-11	3-30
Kings Road	196	Los Angeles, CA	—	4,023	9,527	10,731		4,031	20,250	24,281	(11,236	)	1979	Jun-97	3-30
Lafayette Highlands	150	Lafayette, CA	—	17,774	41,473	410		17,774	41,883	59,657	(2,716	)	1973	Apr-14	5-30
Lakeshore Landing	308	San Mateo, CA	—	38,155	89,028	2,950		38,155	91,978	130,133	(6,171	)	1988	Apr-14	5-30
Laurels at Mill Creek	164	Mill Creek, WA	—	1,559	6,430	5,390		1,595	11,784	13,379	(7,694	)	1981	Dec-96	3-30
Lawrence Station	336	Sunnyvale, CA	—	45,532	106,735	(15	)	45,532	106,720	152,252	(8,451	)	2012	Apr-14	5-30
Le Parc Luxury Apartments	140	Santa Clara, CA	—	3,090	7,421	11,118		3,092	18,537	21,629	(12,351	)	1975	Feb-94	3-30
Marbrisa	202	Long Beach, CA	—	4,700	18,605	6,526		4,760	25,071	29,831	(10,771	)	1987	Sep-02	3-30
Marina City Club (6)	101	Marina Del Rey, CA	—	—	28,167	40,352		—	68,519	68,519	(17,674	)	1971	Jan-04	3-30
Marina Cove (7)	292	Santa Clara, CA	—	5,320	16,431	12,560		5,324	28,987	34,311	(18,435	)	1974	Jun-94	3-30
Mariner's Place	105	Oxnard, CA	—	1,555	6,103	2,150		1,562	8,246	9,808	(4,584	)	1987	May-00	3-30
MB 360 Phase I	188	San Francisco, CA	—	21,421	114,376	—		21,421	114,376	135,797	(3,749	)	2014	Apr-14	3-30
Meadowood	320	Simi Valley, CA	—	7,852	18,592	7,060		7,898	25,606	33,504	(16,003	)	1986	Nov-96	3-30
Mesa Village	133	Clairemont, CA	—	1,888	7,498	1,250		1,894	8,742	10,636	(3,967	)	1963	Dec-02	3-30
Mira Monte	355	Mira Mesa, CA	—	7,165	28,459	9,237		7,186	37,675	44,861	(19,094	)	1982	Dec-02	3-30
Miracle Mile/Marbella	236	Los Angeles, CA	—	7,791	23,075	13,484		7,886	36,464	44,350	(20,985	)	1988	Aug-97	3-30
Mission Hills	282	Oceanside, CA	—	10,099	38,778	4,996		10,167	43,706	53,873	(16,771	)	1984	Jul-05	3-30
Mission Peaks	453	Fremont, CA	—	46,499	108,498	1,181		46,499	109,679	156,178	(7,087	)	1995	Apr-14	5-30
Mission Peaks II	336	Fremont, CA	—	31,429	73,334	2,011		31,429	75,345	106,774	(4,860	)	1989	Apr-14	5-30
Monterey Villas	122	Oxnard, CA	—	2,349	5,579	5,880		2,424	11,384	13,808	(6,284	)	1974	Jul-97	3-30
Muse	152	Los Angeles, CA	—	7,822	33,436	2,168		7,823	35,603	43,426	(8,563	)	2011	Feb-11	3-30
Museum Park	117	San Jose, CA	—	13,864	32,348	476		13,864	32,824	46,688	(2,145	)	2002	Apr-14	5-30
Paragon	301	Fremont, CA	—	32,230	77,320	328		32,230	77,648	109,878	(3,782	)	2013	Jul-14	3-30
Park Catalina	90	Los Angeles, CA	—	4,710	18,839	2,281		4,710	21,120	25,830	(2,730	)	2002	Jun-12	3-30
Park Viridian	320	Anaheim, CA	—	15,894	63,574	1,116		15,894	64,690	80,584	(4,137	)	2008	Apr-14	5-30

F- 56

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2015

(Dollars in thousands)



						Costs
				Initial cost		capitalized	Gross amount carried at close of period
	Apartment				Buildings and	subsequent to	Land and	Buildings and		Accumulated		Date of	Date	Lives
Property	Homes	Location	Encumbrance	Land	improvements	acquisition	improvements	improvements	Total (1)	depreciation		construction	acquired	(years)
Park West	126	San Francisco, CA	—	9,424	21,988	9,472	9,424	31,460	40,884	(3,667	)	1958	Sep-12	3-30
Parkwood at Mill Creek	240	Mill Creek, WA	—	10,680	42,722	1,517	10,680	44,239	54,919	(2,875	)	1989	Apr-14	5-30
Pinehurst (8)	28	Ventura, CA	—	—	1,711	482	6	2,187	2,193	(1,049	)	1973	Dec-04	3-30
Pinnacle Crow Canyon	400	San Ramon, CA	—	37,579	87,685	1,717	37,579	89,402	126,981	(5,791	)	1992	Apr-14	5-30
Pinnacle Sonata	268	Bothell, WA	—	14,647	58,586	564	14,647	59,150	73,797	(3,807	)	2000	Apr-14	5-30
Radius	264	Redwood City, CA	—	11,702	152,336	28	11,702	152,364	164,066	(7,622	)	2015	Apr-14	3-30
Reed Square	100	Sunnyvale, CA	—	6,873	16,037	7,750	6,873	23,787	30,660	(4,356	)	1970	Jan-12	3-30
Regency at Encino	75	Encino, CA	—	3,184	12,737	2,519	3,184	15,256	18,440	(3,896	)	1989	Dec-09	3-30
Renaissance at Uptown Orange	460	Orange, CA	—	27,870	111,482	1,600	27,870	113,082	140,952	(7,246	)	2007	Apr-14	5-30
Reveal	438	Woodlands Hills, CA	—	25,073	121,314	232	25,073	121,546	146,619	(3,334	)	2010	Apr-15	3-30
Salmon Run at Perry Creek	132	Bothell, WA	—	3,717	11,483	1,624	3,801	13,023	16,824	(6,577	)	2000	Oct-00	3-30
Sammamish View	153	Bellevue, WA	—	3,324	7,501	6,192	3,331	13,686	17,017	(10,310	)	1986	Nov-94	3-30
101 San Fernando	323	San Jose, CA	—	4,173	58,961	8,048	4,173	67,009	71,182	(13,787	)	2001	Jul-10	3-30
San Marcos	432	Richmond, CA	—	15,563	36,204	27,780	22,866	56,681	79,547	(23,786	)	2003	Nov-03	3-30
Santee Court/Santee Village	238	Los Angeles, CA	—	9,581	40,317	4,524	9,582	44,840	54,422	(8,616	)	2004	Oct-10	3-30
Shadow Point	172	Spring Valley, CA	—	2,812	11,170	2,406	2,820	13,568	16,388	(6,197	)	1983	Dec-02	3-30
Shadowbrook	418	Redmond, WA	—	19,292	77,168	2,326	19,292	79,494	98,786	(5,082	)	1986	Apr-14	5-30
Slater 116	108	Kirkland, WA	—	7,379	22,138	513	7,379	22,651	30,030	(1,793	)	2013	Sep-13	3-30
Solstice	280	Sunnyvale, CA	—	34,444	147,262	4,096	34,444	151,358	185,802	(11,281	)	2014	Apr-14	5-30
Stonehedge Village	196	Bothell, WA	—	3,167	12,603	5,739	3,201	18,308	21,509	(11,102	)	1986	Oct-97	3-30
Summit Park	300	San Diego, CA	—	5,959	23,670	4,773	5,977	28,425	34,402	(13,134	)	1972	Dec-02	3-30
Taylor 28	197	Seattle, WA	—	13,915	57,700	218	13,915	57,918	71,833	(3,686	)	2008	Apr-14	5-30
The Cairns	100	Seattle, WA	—	6,937	20,679	1,055	6,939	21,732	28,671	(6,340	)	2006	Jun-07	3-30
The Commons	264	Campbell, CA	—	12,555	29,307	4,687	12,556	33,993	46,549	(7,457	)	1973	Jul-10	3-30
The Grand	243	Oakland, CA	—	4,531	89,208	5,072	4,531	94,280	98,811	(24,391	)	2009	Jan-09	3-30
The Hallie on del Mar/Rey/Sol	292	Pasadena, CA	—	2,202	4,794	48,986	8,385	47,597	55,982	(17,675	)	1972	Apr-99	3-30
The Lofts at Pinehurst	118	Sunnyvale, CA	—	1,570	3,912	4,544	1,618	8,408	10,026	(4,565	)	2012	Apr-14	3-30
The Pointe at Cupertino	116	Cupertino, CA	—	4,505	17,605	11,510	4,505	29,115	33,620	(11,984	)	1963	Aug-98	3-30
The Stuart at Sierra Madre	188	Pasadena, CA	—	13,574	54,298	1,486	13,574	55,784	69,358	(3,674	)	2007	Apr-14	5-30
The Trails of Redmond	423	Redmond, WA	—	21,930	87,720	2,408	21,930	90,128	112,058	(5,779	)	1985	Apr-14	5-30
Tiffany Court	101	Los Angeles, CA	—	6,949	27,796	461	6,949	28,257	35,206	(1,811	)	1987	Apr-14	5-30
Trabuco Villas	132	Lake Forest, CA	—	3,638	8,640	2,605	3,890	10,993	14,883	(6,549	)	1985	Oct-97	3-30

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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2015

(Dollars in thousands)



									Costs
					Initial cost				capitalized		Gross amount carried at close of period
	Apartment						Buildings and		subsequent to		Land and		Buildings and				Accumulated			Date of	Date	Lives
Property	Homes	Location	Encumbrance		Land		improvements		acquisition		improvements		improvements		Total (1)		depreciation			construction	acquired	(years)
Tuscana	30	Tracy, CA	—		2,828		6,599		166		2,870		6,723		9,593		(2,668		)	2007	Feb-07	3-30
Via	284	Sunnyvale, CA	—		22,000		82,270		944		22,016		83,198		105,214		(15,571		)	2011	Jul-11	3-30
Villa Siena	272	Costa Mesa, CA	—		13,842		55,367		1,333		13,842		56,700		70,542		(3,632		)	1974	Apr-14	5-30
Village Green	272	La Habra, CA	—		6,488		36,768		2,168		6,488		38,936		45,424		(2,491		)	1971	Apr-14	5-30
Vista Belvedere	76	Tiburon, CA	—		5,573		11,901		7,360		5,573		19,261		24,834		(7,708		)	1963	Aug-04	3-30
Vox	58	Seattle, WA	—		5,545		16,635		70		5,545		16,705		22,250		(1,237		)	2013	Oct-13	3-30
Walnut Heights	163	Walnut, CA	—		4,858		19,168		3,920		4,887		23,059		27,946		(9,514		)	1964	Oct-03	3-30
Wharfside Pointe	155	Seattle, WA	—		2,245		7,020		10,292		2,258		17,299		19,557		(10,007		)	1990	Jun-94	3-30
Willow Lake	508	San Jose, CA	—		43,194		101,030		6,615		43,194		107,645		150,839		(12,559		)	1989	Oct-12	3-30
5600 Wilshire	284	Los Angeles, CA	—		30,535		91,604		471		30,535		92,075		122,610		(5,937		)	2008	Apr-14	5-30
Wilshire La Brea	478	Los Angeles, CA	—		56,932		211,998		6,259		56,932		218,257		275,189		(16,228		)	2014	Apr-14	5-30
Windsor Ridge	216	Sunnyvale, CA	—		4,017		10,315		15,210		4,021		25,521		29,542		(15,505		)	1989	Mar-89	3-30
Woodland Commons	302	Bellevue, WA	—		2,040		8,727		20,544		2,044		29,267		31,311		(14,679		)	1978	Mar-90	3-30
Woodside Village	145	Ventura, CA	—		5,331		21,036		3,502		5,341		24,528		29,869		(9,667		)	1987	Dec-04	3-30
	31,451		$	—	$	1,667,597	$	5,970,356	$	754,076	$	1,691,213	$	6,700,816	$	8,392,029	$	(1,177,395	)



									Costs
					Initial cost				capitalized		Gross amount carried at close of period
	Square						Buildings and		subsequent		Land and		Buildings and				Accumulated			Date of	Date	Lives
Property	Footage	Location	Encumbrance		Land		improvements		to acquisition		improvements		improvements		Total(1)		depreciation			construction	acquired	(years)
Other real estate assets
Hollywood	34,000	Los Angeles, CA	$	—	$	10,200	$	13,800	$	2,470	$	10,200	$	16,270	$	26,470	$	(5,777	)	1938	Jul-06	3-30
Santa Clara Retail	138,915	Santa Clara, CA	—		6,472		11,704		5,556		6,472		17,260		23,732		(4,643		)	1970	Sep-11	3-30
Derian Office Building	106,564	Irvine, CA	—		3,079		12,315		4,049		4,308		15,135		19,443		(11,162		)	1983	Jul-00	3-30
	279,479		$	—	$	19,751	$	37,819	$	12,075	$	20,980	$	48,665	$	69,645	$	(21,582	)

Total			$	2,215,077	$	2,484,492	$	8,598,162	$	1,248,815	$	2,522,842	$	9,808,627	$	12,331,469	$	(1,949,892	)

(1) The aggregate cost for federal income tax purposes is approximately $8.9 billion (unaudited).

(2) The land is leased pursuant to a ground lease expiring 2082.

F- 58

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2015

(Dollars in thousands)

(3) The land is leased pursuant to a ground lease expiring 2070.

(4) The land is leased pursuant to a ground lease expiring 2030.

(5) The land is leased pursuant to a ground lease expiring 2027.

(6) The land is leased pursuant to a ground lease expiring 2067.

(7) A portion of land is leased pursuant to a ground lease expiring in 2028.

(8) The land is leased pursuant to a ground lease expiring in 2028.

A summary of activity for rental properties and accumulated depreciation is as follows:



	2015			2014			2013				2015			2014			2013
Rental properties:										Accumulated depreciation:
Balance at beginning of year	$	11,244,681		$	5,443,757		$	5,033,672		Balance at beginning of year	$	1,564,806		$	1,254,886		$	1,081,517
Improvements	220,895			135,812			92,016			Depreciation expense - Acquisitions	15,734			121,426			6,203
Acquisition of real estate (1)	805,124			5,678,054			344,476			Depreciation expense - Discontinued operations	—			—			12,290
Development of real estate	307,083			19,751			14,111			Depreciation expense - Rental properties	386,953			199,495			168,092
Disposition of real estate	(246,314		)	(32,693		)	(40,518		)	Dispositions	(17,601		)	(11,001		)	(13,216		)
Balance at the end of year	$	12,331,469		$	11,244,681		$	5,443,757		Balance at the end of year	$	1,949,892		$	1,564,806		$	1,254,886

(1) Amount for 2014 includes $5.2 billion related to BRE merger.

F- 59

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Mateo, State of California, on February 26, 2016.



	ESSEX PROPERTY TRUST, INC.

	By: /S/ ANGELA L. KLEIMAN
	Angela L. Kleiman
	Executive Vice President, Chief Financial Officer (Authorized Officer, Principal Financial Officer)

	By: /S/ JOHN FARIAS
	John Farias
	Group Vice President, Chief Accounting Officer

	ESSEX PORTFOLIO, L.P. By: Essex Property Trust, Inc., its general partner

	By: /S/ ANGELA L. KLEIMAN
	Angela L. Kleiman
	Executive Vice President, Chief Financial Officer (Authorized Officer, Principal Financial Officer)

	By: /S/ JOHN FARIAS
	John Farias
	Group Vice President, Chief Accounting Officer

S-1

KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael J. Schall and Angela L. Kleiman, and each of them, his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of each Registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/S/ MICHAEL J. SCHALL Michael J. Schall	Chief Executive Officer and President, and Director (Principal Executive Officer)	February 26, 2016

/S/ KEITH R. GUERICKE Keith R. Guericke	Director, and Vice Chairman of the Board	February 26, 2016

/S/ GEORGE M. MARCUS George M. Marcus	Director and Chairman of the Board	February 26, 2016

/S/ DAVID W. BRADY David W. Brady	Director	February 26, 2016

/S/ IRVING F. LYONS, III Irving F. Lyons, III	Director	February 26, 2016

/S/ GARY P. MARTIN Gary P. Martin	Director	February 26, 2016

/S/ ISSIE N. RABINOVITCH Issie N. Rabinovitch	Director	February 26, 2016

/S/ THOMAS E. ROBINSON Thomas E. Robinson	Director	February 26, 2016

/S/ BYRON A. SCORDELIS Byron A. Scordelis	Director	February 26, 2016

/S/ JANICE L. SEARS Janice L. Sears	Director	February 26, 2016

/S/ THOMAS P. SULLIVAN Thomas P. Sullivan	Director	February 26, 2016

/S/ CLAUDE J. ZINNGRABE Claude J. Zinngrabe	Director	February 26, 2016

S-2

EXHIBIT INDEX



Exhibit No.	Document

3.1	Articles of Amendment and Restatement of Essex Property Trust, Inc., attached as Exhibit 3.1 to the Company's Current Report on Form 8-K, filed May 17, 2013, and incorporated herein by reference.

3.2	Fourth Amended and Restated Bylaws of Essex Property Trust, Inc. (as of February 24, 2015), attached as Exhibit 3.2 to the Company's Current Report on Form 8-K, filed March 2, 2015, and incorporated herein by reference.

3.3	Certificate of Limited Partnership of Essex Portfolio, L.P. and amendments thereto, attached as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013, and incorporated herein by reference.

4.1	Form of 7.125% Series H Cumulative Redeemable Preferred Stock Certificate, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed April 13, 2011, and incorporated herein by reference.

4.2	Indenture, dated August 15, 2012, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.625% Senior Notes due 2022 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed August 15, 2012, and incorporated herein by reference.

4.3	Indenture, dated April 15, 2013, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.25% Senior Notes due 2023 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed April 15, 2013, and incorporated herein by reference.

4.4	Form of Common Stock Certificate of Essex Property Trust, Inc., filed as Exhibit 4.5 to the Company's Form S-4 Registration Statement, filed January 29, 2014, and incorporated herein by reference.

4.5	Indenture governing 5.500% Senior Notes due 2017, dated April 4, 2014, by and among Essex Portfolio, L.P., Essex Property Trust, Inc. and U.S. Bank National Association, as trustee, including the form of 5.500% Senior Notes due 2017, attached as Exhibit 4.1 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.

4.6	Indenture governing 5.200% Senior Notes due 2021, dated April 4, 2014, by and among Essex Portfolio, L.P., Essex Property Trust, Inc. and U.S. Bank National Association, as trustee, including the form of 5.200% Senior Notes due 2021, attached as Exhibit 4.2 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.

4.7	Indenture governing 3.375% Senior Notes due 2023, dated April 4, 2014, by and among Essex Portfolio, L.P., Essex Property Trust, Inc. and U.S. Bank National Association, as trustee, including the form of 3.375% Senior Notes due 2023, attached as Exhibit 4.3 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.

4.8	Registration Rights Agreement related to the 5.500% Senior Notes due 2017, dated April 4, 2014, between Essex Portfolio, L.P. and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities, LLC, attached as Exhibit 4.7 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.

4.9	Registration Rights Agreement related to the 5.200% Senior Notes due 2021, dated April 4, 2014, between Essex Portfolio, L.P. and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities, LLC, attached as Exhibit 4.8 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.

4.10	Registration Rights Agreement related to the 3.375% Senior Notes due 2023, dated April 4, 2014, between Essex Portfolio, L.P. and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities, LLC, attached as Exhibit 4.9 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.

4.11	Indenture, dated April 15, 2014, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.875% Senior Notes due 2024 and the guarantee thereof, attached as Exhibit 4.1 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 16, 2014, and incorporated herein by reference.

4.12	Registration Rights Agreement, dated April 15, 2014, among Essex Portfolio, L.P., Essex Property Trust, Inc., and Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities, LLC as representatives of the several initial purchasers, attached as Exhibit 10.1 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 16, 2014, and incorporated herein by reference.



4.13	Indenture, dated March 17, 2015, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.500% Senior Notes due 2025 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed March 17, 2015, and incorporated herein by reference.

10.1	Agreement between Essex Property Trust, Inc. and George M. Marcus, dated March 27, 2003 attached as Exhibit 10.32 to the Company's Form 10-K for the year ended December 31, 2002, and incorporated herein by reference.

10.2	Essex Property Trust, Inc. 2004 Stock Incentive Plan, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference.*

10.3	2005 Deferred Compensation Plan (as amended and restated) of Essex Portfolio, L.P., dated as of December 2, 2008, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed December 8, 2008, and incorporated herein by reference.*

10.4	Form of Indemnification Agreement between Essex Property Trust, Inc. and its directors and officers, attached as Exhibit 99.1 to the Company's Current Report on Form 8-K, filed February 25, 2011, and incorporated herein by reference.*

10.5	Note Purchase Agreement, dated as of March 31, 2011, among Essex Portfolio, L.P., Essex Property Trust, Inc. and the purchasers of the notes party thereto (including the form of the 4.36% Senior Guaranteed Notes, due March 31, 2016), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed April 1, 2011, and incorporated herein by reference. †

10.6	Note Purchase Agreement, dated as of June 30, 2011, among Essex Portfolio, L.P., Essex Property Trust, Inc. and the purchasers of the notes party thereto (including the forms of the 4.50% Senior Guaranteed Notes, Series A, due September 30, 2017, and the 4.92% Senior Guaranteed Notes, Series B, due December 30, 2019), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed July 5, 2011, and incorporated herein by reference. †

10.7	Amended and Restated 2004 Non-Employee Director Equity Award Program, dated May 1, 2011, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference.*

10.8	Amended and Restated Revolving Credit Agreement, dated as of September 16, 2011, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent, Swing Line Lender and C Issuer, and other lenders as specified therein, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and incorporated herein by reference.

10.9	Note Purchase Agreement, dated as of March 14, 2012, among Essex Portfolio, L.P., the Company and the purchasers of the notes party thereto (including the forms of the 4.27% Senior Guaranteed Notes, Series C, due April 30, 2021, the 4.30% Senior Guaranteed Notes, Series D, due June 29, 2021, and the 4.37% Senior Guaranteed Notes, Series E, due August 30, 2021), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on March 20, 2012, and incorporated herein by reference. †

10.10	First Amendment to Amended and Restated Revolving Credit Agreement, dated May 31, 2012, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and the other lenders party thereto, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and incorporated herein by reference.

10.11	Modification Agreement, dated July 30, 2012, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and incorporated herein by reference.

10.12	Amendment to Agreement, dated as of September 11, 2012, between the Company and George Marcus, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, and incorporated herein by reference.

10.13	Essex Property Trust, Inc. Executive Severance Plan (as Amended and Restated effective March 12, 2013), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed March 18, 2013, and incorporated herein by reference.*

10.14	Second Amendment to Amended and Restated Revolving Credit Agreement, dated August 30, 2012, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and C Issuer and the other lenders party thereto, attached as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference.



10.15	Third Amendment to Amended and Restated Revolving Credit Agreement, dated January 22, 2013, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and C Issuer and the other lenders party thereto, attached as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference.

10.16	Essex Property Trust, Inc. 2013 Stock Award and Incentive Compensation Plan, attached as Appendix B to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 14, 2013, filed April 1, 2013, and incorporated herein by reference.*

10.17	Essex Property Trust, Inc. 2013 Employee Stock Purchase Plan, attached as Appendix C to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 14, 2013, filed April 1, 2013, and incorporated herein by reference.*

10.18	Forms of equity award agreements for officers under the 2013 Stock Award and Incentive Compensation Plan, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.*

10.19	Company's Non-Employee Director Equity Award Program and forms of equity award agreements thereunder, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.*

10.20	Third Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of December 10, 2013, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed December 12, 2013, and incorporated herein by reference.*

10.21	Fourth Amendment to Amended and Restated Revolving Credit Agreement, dated as of January 29, 2014, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and the other lenders party thereto, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed January 31, 2014, and incorporated herein by reference.

10.22	Third Modification Agreement, dated as of January 29, 2014 by and among Essex Portfolio, L.P., U.S. Bank National Association, as Administrative Agent and Lender and the other lenders party thereto, attached as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed January 31, 2014, and incorporated herein by reference.

10.23	BRE Properties, Inc. 1999 Stock Incentive Plan (assumed by Essex Property Trust, Inc.), attached as Exhibit 99.1 to Essex Property Trust, Inc.'s Registration Statement on Form S-8, filed April 1, 2014, and incorporated herein by reference.*

10.24	BRE Properties, Inc. Fifth Amended and Restated Non-Employee Stock Option and Restricted Stock Plan (assumed by Essex Property Trust, Inc.), attached as Exhibit 99.2 to Essex Property Trust, Inc.'s Registration Statement on Form S-8, filed April 1, 2014, and incorporated herein by reference.*

10.25	Form of Equity Distribution Agreement between Essex Property Trust, Inc. and various entities, dated August 28, 2014, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed September 2, 2014, and incorporated herein by reference.

10.26	Form of Amended & Restated Equity Distribution Agreement between Essex Property Trust, Inc. and various entities, dated August 28, 2014, attached as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed September 2, 2014, and incorporated herein by reference.

10.27	Fifth Amendment to Amended and Restated Revolving Credit Agreement, dated as of January 22, 2015, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and other lenders party thereto, attached as Exhibit 10.27 to the Company's Annual Report on Form 10-K, filed March 2, 2015, and incorporated herein by reference.

10.28	Forms of Essex Property Trust, Inc., Essex Portfolio L.P., Long-Term Incentive Plan Award Agreements, attached as Exhibit 10.28 to the Company's Annual Report on Form 10-K, filed March 2, 2015, and incorporated herein by reference.*

10.29	Terms Agreement dated as of May 20, 2015, among Essex Property Trust, Inc. and Citigroup Global Markets Inc., attached as Exhibit 1.1 to the Company's Current Report on Form 8-K, filed on May 26, 2015, and incorporated herein by reference.

10.30	Sixth Amendment to Amended and Restated Revolving Credit Agreement, dated as of January 19, 2016, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and other lenders party thereto.

12.1	Schedule of Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.

21.1	List of Subsidiaries of Essex Property Trust, Inc. and Essex Portfolio, L.P.




23.1	Consent of KPMG LLP, Independent Registered Public Accounting Firm.

23.2	Consent of KPMG LLP, Independent Registered Public Accounting Firm.

24.1	Power of Attorney (see signature page)

31.1	Certification of Michael J. Schall, Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Angela L. Kleiman, Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.3	Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.4	Certification of Angela L. Kleiman, Principal Financial Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Michael J. Schall, Principal Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Angela L. Kleiman, Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.3	Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.4	Certification of Angela L. Kleiman, Principal Financial Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

Management contract or compensatory plan or arrangement.

† The schedules and certain exhibits to this agreement, as set forth in the agreement, have not been filed herewith. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.

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